More homes were within buyers' budget in 2019, new study says

Affordability is a hot topic these days, with many would-be buyers feeling left out of the housing market because of high prices.

As home prices have climbed in recent years, wage increases have failed to keep pace. From the third quarter of 2018 to the third quarter of 2019, home prices rose 5.3%, while household incomes rose by 3.5%, according to Realtor.com. On the bright side, low mortgage rates under 4.0% have reduced interest costs and therefore monthly payments to at least partly offset high home prices.

Realtor.com's analysis of home prices and median household incomes generates an "affordability score." An affordability score of one or greater on the index indicates that a metro area's housing market is generally more affordable to households across all incomes. In the third quarter of 2019, the majority of metro areas were unaffordable. Only 18 of the nation's largest 100 metros had a score of one or greater and the national score of 0.84 registers as unaffordable.

The good news, though, is that a combination of low rates, higher wages and slowing price appreciation meant that in the third quarter of 2019, 81 of the nation's 100 largest metro areas became more affordable compared to the third quarter of 2018.

Whether homes in your market are more affordable, though, depends on your budget and local market. Better affordability doesn't mean that buyers in every price range will be able to find a more affordable house. According to Realtor.com's analysis, the number of homes for sale priced above $750,000 increased by 4.7% when comparing the third quarter of 2019 to the third quarter of 2018. But the number of homes for sale priced at $200,000 and under declined 9.8% during that same period.

Metro area differences exist, too. In the Washington, D.C. area, 42% of homes for sale are affordable to people earning the median household income. The region has an affordability score of 0.86, an increase of 0.9% over the third quarter of 2018 and slightly above the national average but still generally indicating an unaffordable market.

The top five markets where affordability improved the most between the third quarter of 2018 and the third quarter of 2019 include:

1. Allentown-Bethlehem, Pennsylvania, where the affordability score increased from 0.98 to 1.11.

2. Des Moines, where the affordability score increased from 0.90 to 1.04.

3. Atlanta, where the affordability score increased from 0.77 to 0.89.

4. Minneapolis, where the affordability score increased from 0.79 to 0.90.

5. San Francisco, where the affordability score increased from 0.47 to 0.59.