More homes are beyond reach of middle class

Rising home prices and stagnant incomes are pushing homeownership beyond the reach of middle-class Americans in more cities, a new study finds.

In 20 of the 100 largest metro areas, a majority of homes on the market are not affordable for middle-income buyers, according to a study released Tuesday by real estate research firm Trulia.

A home is considered affordable, by Trulia's definition, if total monthly costs after a 20% down payment — including mortgage, insurance and property taxes — are less than 31% of a region's median household income.

Rising home prices and interest rates, combined with modest wage increases, have chipped away at affordability over the past year, says Trulia Chief Economist Jed Kolko. Monthly payments for an average home cost 20% more than a year ago, he says.

"Affordability is worsening," Kolko says. "Prices are still rising faster than wages and income."

By historical standards, homes are still relatively affordable as the nation continues to recover from the 2007 housing crash. Nationally, home prices late last year were 20% above their 2011 nadir but 21% below their 2006 peak, according to CoreLogic Case-Shiller Indexes out Tuesday. Interest rates remain low. And buying is cheaper than renting in all of the 100 metro areas, Trulia's study found.

But since May 2013, the share of affordable homes has declined in 98 of those markets. Only Rochester, N.Y., and Hartford, Conn., had slight increases.

In a separate report released Tuesday, the Federal Housing Finance Agency said it wants to make homeownership more accessible to low- and moderate-income families. The agency said it expects Fannie Mae and Freddie Mac, which the FHFA regulates and which finance most mortgages, "to assess whether there are additional opportunities to reach underserved creditworthy borrowers."

Affordability varies widely across the USA. In the San Francisco area, just 14% of homes for sale are affordable for middle-class buyers, down from 20% a year ago. Even more telling: Just 44% of the technology hotbed's sales inventory is within reach of average residents with graduate degrees, who typically have higher incomes.

Seven of the 10 least affordable markets are in California. Rounding out the bottom 10 are the New York City area, where 25% of for-sale homes affordable; Fairfield County, Conn., 37%; and Honolulu, 39%.

Several metro areas had particularly steep drops in affordability the past year. In Denver, the share of affordable homes tumbled to 50% from 67%. The portion dropped to 29% from 43% in Ventura County, Calif., and to 48% from 62% in San Antonio.

At the other end of the spectrum, five of the 10 most affordable areas are in Ohio. In Akron, 86% of homes for sale are affordable. In Gary Ind., 83% meet the criteria; in Columbia, S.C., 82%.

A big reason housing is expensive in many areas is a dearth of new home construction. Land for development is limited and building regulations are onerous in parts of coastal California, South Florida and the Northeast, while property is more widely available in the Midwest and South, Kolko says.

Existing home inventories are also low in part because the foreclosure crisis has eased, thinning the stock of low-priced homes on the market.