{"id":1682,"date":"2025-08-13T17:48:11","date_gmt":"2025-08-13T17:48:11","guid":{"rendered":"https:\/\/bentonfranklintrends.org\/newsletter\/?page_id=1682"},"modified":"2025-08-18T21:17:25","modified_gmt":"2025-08-18T21:17:25","slug":"aug25_main1","status":"publish","type":"page","link":"https:\/\/bentonfranklintrends.org\/newsletter\/aug25_main1\/","title":{"rendered":"The Decline in Housing Affordability in the Two Counties Has Leveled Off"},"content":{"rendered":"
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By Dr. Patrick Jones<\/strong><\/p>

A great American pastime has become tracking house prices. Think how often we check Zillow or Realtor.com for the latest valuation on our own home, and let\u2019s admit, sometimes of our neighbors\u2019.<\/p>

Of course, the price of a house matters beyond neighborly curiosity. A house is typically the largest purchase a family will make in its lifetime, maybe doing this several times. For employers hoping to attract workers to their firms and organizations, good, moderately priced housing is a big selling point. The recent rapid run-up in housing prices nationally has astonished many Americans.<\/p>

Then there\u2019s the residential construction industry. Construction generally is one of a local economy\u2019s largest sectors. In Benton and Franklin Counties, it ranks 6th by employment. And taxes on construction make up one of the pillars of revenue for local governments.<\/p>

So most adults care about housing prices. This measure uses the median price, not the average. Given the ability of a few very expensive properties to influence an average, most economists prefer the median as a better representation of the \u201cmiddle.\u201d<\/p>

This measure tracks only those homes that have been inhabited and sold at least once before. In other words, no new construction. This is largely due to data gathering reasons.<\/p>

As Trends indicator on the median home resale price displays the pandemic brought on a gain of nearly $135,000 between the first quarters of 2020 and 2022. That\u2019s a gain of 39% in two years!<\/p>

Of course, local housing prices before the pandemic enjoyed a steady appreciation. Who remembers that a decade ago, the median house resale price was $184,000? And today? $441,000.<\/p>

But the price is only one part of the housing purchase picture. Income matters. If household incomes had increased by 39% between 2020 and 2022, not too many people would have complained. But of course, incomes didn\u2019t do this.<\/p>

Enter an affordability index. They are several versions in the U.S., all with the goal of juxtaposing income and housing costs. This one comes from the Real Estate Research Center at the University of Washington and is published quarterly. Like all such indexes, it is a ratio of available income in the numerator and the cost of a mortgage in the denominator. Specifically for this index, an \u201cAll-Buyers\u201d version, the numerator consists of 30% of area median household income. That reflects a key assumption that a household shouldn\u2019t spend more than 30% of its income on housing, a long-held position from the U.S. Housing & Urban Development department.<\/p>

In the denominator is the housing cost. For this indicator, it is the mortgage cost of the median price of a resale home on the market for the quarter. In other words, this component factors in both price and mortgage rates.<\/p>

For the local market to be \u201cin balance,\u201d the ratio should be 100. Levels above 100 imply \u201caffordability\u201d while levels below 100 connote a lack of affordability.<\/p>

It is easy to see from the graph for this Trends measure that the market in the greater Tri Cities for these homes is unaffordable to the median buyer. The most recent value, from Q1 of this year, registers 84. As recently as the end of 2021, the index was greater than 100. A rapid decline then followed until the start of 2023.<\/p>

In the last three quarters, the decline of the index has stopped, raising the question: will there be a return to affordability for the median buyer in the greater Tri Cities? Mortgage rates aren\u2019t helping, but rising incomes may. The prior year represented a departure from the recent rapid rise in household incomes in the two counties. With prices of resale homes increasing only slowly, whether the ratio improves will likely depend on an income increase. We\u2019ll know by the middle of next month how much median household income rose in 2024.<\/p><\/div><\/div><\/div><\/div>

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