Why is purchasing a home so difficult? The salaries of the middle class have not kept up with prices. For the first time since 2002, mortgage rates are higher than 7%. Also, three out of ten houses are sold for more than their listing price.
However, none of those elements really reflects the range of difficulties that consumers across the country encounter in the present marketplace. On the ground, situations might differ significantly between states and even counties.
We are launching a new monthly indicator, the NBC News Home Buyer Index, to more accurately and closely reflect changes in the local housing market.
The Home Buyer Index is a score on a range of 0 to 100 that indicates the difficulties a prospective buyer encounters while attempting to purchase a home. It was created by NBC News with assistance from a real estate industry analyst, a Federal Reserve Bank of Atlanta real estate expert, and other professionals. The difficulty increases with the index value.
For instance, a low index value of 10 indicates favorable buying circumstances for a buyer, such as low mortgage rates and a large number of available properties. As of May, Chambers County, Texas, which is close to Houston, has low scores for competition, cost, and scarcity, making it one of the 50 least difficult areas in the nation to buy.
Extremely difficult circumstances are indicated by a high number nearer 90, which may be the consequence of fierce bidding, expensive insurance, or sharp increases in home values in comparison to income. As of May, Coconino County, Arizona, is among the 25 hardest counties to purchase a property in due to skyrocketing prices. It was ranked 300 five years ago, but the median sale price has risen 81%, or nearly double the national average.
The index gauges difficulties both nationally and at the county level in those where there is sufficient data on homebuying to allow for well-informed evaluations.
The following national index reflects the broad market and economic factors influencing homebuying in the United States.
There are four components to this index:
- Cost: How much a home costs relative to incomes and inflation as well as how related expenses, such as insurance costs, are changing.
- Competition: How many people are vying for a home and how aggressive the demand is. This is measured through observations including the percentage of homes sold above list price and the number that went under contract within two weeks of being listed.
- Scarcity: The number of homes that are on the market and how many more are expected to enter the market in the coming month.
- Economic instability: Market volatility, unemployment and interest rates reflecting the broader climate in which home shoppers are weighing their decisions.
The national Home Buyer Index for November was 82.2, down around four points from this time last year and up almost a point from October.
Over the previous year, conditions have somewhat improved due to improvements in market competition. However, the general difficulty of purchasing a home has remained high due to high costs and ongoing housing shortages.
Every month on the final Thursday, the index is updated. January 30 is the next update date.
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