Along with the housing recovery has come a steep climb in home values and ever-weakening affordability.
Tight supply in markets across the nation has only exacerbated the price pinch. There are, however, plenty of housing markets that offer both affordability and lavish living. As more jobs become flexible in where they need to be located, affordable markets could become more attractive and better investments.
As a basis of comparison, the national average listing price of a four-bedroom, two bathroom home is $302,632, according to a new report from Coldwell Banker Real Estate. In the nation's most expensive market, Newport Beach, California, that same home will list for $2.3 million. In the least expensive market, Cleveland, Ohio, it will list for $74,502.
"Cleveland's community, revitalized downtown and renewed sense of pride have contributed to the rapid growth in this market," said Ed Dolinsky, president of Coldwell Banker Hunter Realty in Cleveland, in the report. "Many first-time home buyers and young professionals are looking at Cleveland as an affordable place to settle down and enjoy all of the great things the city has to offer."
Home prices in Cleveland are up nearly 3 percent from a year ago, according to S&P/Case-Shiller. Price growth in cities such as New York and Washington, D.C., some of the least affordable markets, are growing at a slower pace.
Affordability is becoming more of a headwind, as the housing market continues through its slow recovery. Analysts at Credit Suisse noted, in their monthly survey of real estate agents, that buyer traffic in October was still below expectations.
"This month agents continued to attribute the softness to both buyers' unwillingness to pay current prices and a limited supply of desirable inventories," Michael Dahl, Matthew Bouley and Anthony Trainor wrote in the Credit Suisse report.
Sentiment among homebuyers also slipped in October, according to another monthly report from Fannie Mae. The share of respondents saying now is a good time to buy a house fell 2 percentage points to 34 percent, after rising the prior two months.
"The income growth necessary for renewed momentum in housing market sentiment remains elusive, even though consumers' confidence in their job security continues to strengthen," said Doug Duncan, senior vice president and chief economist at Fannie Mae.
The nation's homebuilders have increasingly focused on higher-end, higher-priced homes, as that is where the bulk of buyer demand has been. As more young workers consider homebuying, however, that strategy may backfire.
D.R. Horton, the nation's largest homebuilder, reported better-than-forecast quarterly earnings Tuesday. Its average selling price of just under $289,000 is lower than most of its large competitors, and its Express Homes, entry-level brand, announced in 2014, with an average sale price of $191,000, shows renewed focus on affordability and a belief that this is the next segment of the market to recover. In comparison, PulteGroup's average selling price grew to $336,000 in the same quarter, the highest on record for the Atlanta-based builder. Analysts have expressed concern that while the higher prices help the company's bottom line, they could hurt sales going forward. D.R. Horton also has a high-end product, but it accounts for far less of total sales.
"We are well-positioned with our industry-leading market share, broad geographic footprint and diversified product offerings across our D.R. Horton, Emerald Homes and Express Homes brands," said Donald R. Horton, chairman of the board, in a release.
While the housing crash was national, the recovery is still local. Nine of the 10 most expensive housing markets are in California, and 45 percent of the most affordable are in the Midwest. Tech jobs continue to drive home prices, both in the West and in tech hubs in the Northeast and in Texas. As housing in these markets becomes cost-prohibitive to young workers, tech companies are expanding their geographical reach, which could make some of the more affordable markets today great investments for tomorrow.