Access to affordable housing is a basic community need. The cost of owning a home compared with income is one important measure of access to affordable housing in the central Puget Sound region.
A shortage of affordable ownership housing can impact transportation, as households are forced to purchase homes far from places of employment, as well as the regional economy, by making it harder to attract and retain workers. Homeownership helps to promote long-term housing stability for families, wealth building opportunities for community residents, and can lead to emotional investment of residents in the neighborhood. VISION 2040 prioritizes developing strategies to ensure affordable homeownership for low- to moderate-income households. Home price is one indicator of the sufficiency of existing land use plans to accommodate market demand for the growth that region is experiencing.
Figure 1 shows affordability trends across the region relative to the median family income. The annual measure of affordability is indicated as an Affordability Index, which produced by the Central Puget Sound Real Estate Research Center from the Runstad Center for Real Estate Studies at the University of Washington. The index is a relative measure that compares income to monthly owner payments. A score of 100 indicates that a household earning the median family income can afford to purchase a median price home. A higher score means that relatively more of the homes on the market are affordable at the median income level; a lower score means that the proportion of affordable homes is more constrained. This benchmark tells us how middle-income households are faring in the homeownership market.
The affordability trend is similar across the region’s counties. Affordability declined during the middle part of the last decade, improved as a result of the bursting of the real estate bubble during the last recession, and again is declining as price increases outstrip average incomes. Owning a home is most expensive, relative to income, in King County, and relatively more affordable in the other counties, especially Kitsap and Pierce counties.
Figure 2 shows the Affordability Index calculated for households that fit the profile of a typical first-time homebuyer. The index, which is also produced by the Real Estate Research Center, is calculated based on a lower income level (70% of median family income) and a lower home price (85% of median home price) and less down payment. Like the overall Affordability Index, a score of 100 indicates that a household earning this income could afford to purchase such a home. A higher score indicates more affordability options for the typical first-time buyer; a lower score indicates fewer of the homes on the market affordable to first time buyers.
The index shows that housing is much less affordable for a first-time buyer than for all buyers. A comparison with Figure 1 shows that the Affordability Index for buyers overall generally has remained above the benchmark score of 100, while the First-Time Homebuyer Index has generally remained well below 100. Like the overall index, affordability for first time homebuyers declined during the housing bubble of the last decade, improved during the subsequent recession, and has recently begun to decline again. King County is the least affordable county for first time buyers.