Beachfronts are Among the Most Challenging In-Home Affordability
Most Americans are familiar with the sky-high costs of housing in places like
New York City or Seattle, Washington, but the fact of the matter is housing
affordability is becoming a problem in many areas of the country. Many of the
worst areas for housing affordability are cities and communities where wealthy
vacationers spend their time and a large percentage of locals serve their
needs. While this trend actually fits the worsening economic inequality that
is reshaping the American society, it also means that living by the beach is
now becoming harder and more expensive than ever.
Where Is the Widest Gap
According to an Associated Press analysis of home values tracked by Core Logic and government collected income data, almost 80% of U.S. metro areas have seen housing affordability and home prices rise faster than wages. Of the top 10 communities with the largest gaps between home prices and incomes, roughly half were located along or near the beach, many mirroring the Los Angeles real estate market of recent years. These places include Oceanside San Diego, Key West, San Francisco, Cape Cod, and Honolulu.
Why Beach Areas Are Taking A Hit
To give you a better idea of what is happening in beach front areas, let’s pause for a second and take a look at an example, Ocean City, New Jersey.
This stretch of the famous Jersey shore includes the Ocean City boardwalk, the cottages of Cape May, and the stunning mansions of Avalon. But why have home prices climbed more than 150% since 2000? And why have wages lagged drastically behind, increasing at just 45%? Well, the answer is pretty simple.
While the area swells in size each summer with the influx of tourists and vacationers, the wealthy with summer homes there often earn their fortunes elsewhere, causing a discrepancy between the average housing price and income. While the growing number of vacationers during the summer does create an increase in jobs (and income), for many restaurant owners, employees, and other seasonal workers, this is not enough to offset the overall difference between housing prices and income- thus driving away year round residents, but keeping housing prices high.
Housing Affordability is a Problem
Throughout the Country
While many areas that are known for their sandy
beaches are taking a hit in housing affordability, they are far from the only
communities. Other areas that have attracted attention for their low home
affordability, include major cities and tech hubs, such as: Austin, Texas; San
Luis Obispo, California; Boise, Idaho; and Napa, California.
Where Are Homes Still Affordable
Even with the ratio of home prices to income
increasing in major metropolitan areas, there are still areas where homes are
relatively affordable based on the average income one can expect to earn. Here
are a few of the areas to be on the lookout for:
- Areas where home prices have yet to fully recover to their pre-2008 housing market crash peaks (places like the mid-sized cities of Albany and Valdosta, Georgia).
- Areas that never experienced either a surge or subsequent crash from the 2008 housing bubble (places like Bloomington and Peoria, Illinois).
It’s Time to Get Started
With home prices rising faster than wages in a vast majority of U.S. metro
areas, getting your foot in the door early and taking advantage of great deals
can bring benefits that may last for a lifetime. Even if you cannot afford your
dream home yet, getting into the real estate market, even with a small starter
home will make a significant difference in the financial and real estate
opportunities in your future.