Issue Brief: Southwest Florida Housing Affordability
During the past few years, in a period of low interest rates and increasing demand for homes, the U.S housing market has seen record high prices that are increasing at a faster rate than wages. Now that the U.S has entered a restrictive monetary policy period, high prices together with high interest rates have significantly decreased housing affordability. According to the National Association of Realtors, housing affordability ended 2022 with double digit declines from a year ago in all four regions of the country. Moreover, there is a housing shortage which has reached crisis proportions at the same time as millennials are reaching the age when they are beginning to consider buying a home, which is likely to keep prices high.
Considering that housing represents a significant portion of disposable income, changes in housing prices affect households. If households must spend more on housing, and their income doesn’t increase proportionately, they will spend less in other areas, ultimately affecting the broader economy.
To get some insight into the housing affordability of the Southwest Florida region, we created a Housing Affordability Index (HAI) for each of the Southwest Florida coastal counties in the region, particularly Lee, Collier, and Charlotte County. The indices were calculated following the methodology of the Texas Housing Affordability Index (THAI) which was developed by the Texas A&M University, and it reflects the relationship between the median family income in a location and the amount required to purchase a median-priced home.
The availability of affordable housing is a major concern in SWFL, where skyrocketing home prices have brought housing affordability to its lowest levels in more than a decade. For first time homebuyers, any type of median priced residential property in the region is unaffordable according to the HAI metrics. Whereas for repeat buyers, median priced single-family homes are not affordable in Lee County and the median family income is just enough to afford a single-family home in Collier County.