Price gains stretch affordability gap between markets

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Home price increases are stretching the affordability gap between expensive and low-cost housing markets, with most of the least affordable markets experiencing some of the largest price gains in the last year, Trulia reported.

“Prices are rising fastest in the local markets that were least affordable to begin with,” said Jed Kolko, chief economist at Trulia. “As the gap between the most and least affordable markets widens, more people in expensive markets like California will look to relocate to cheaper markets like Texas when the time comes to buy.”

While asking prices rose 9.5 percent year over year in May, they were up an average of 16.3 percent in the 10 least affordable metros, according to the latest Trulia Price Monitor.

The disproportionately high price increases in expensive markets are highly concentrated in California, according to Trulia.

Seven of the 10 least affordable markets were in California, and they all showed price increases above the national average, Trulia reported. According to the company’s price index, prices rose more than 20 percent year over year in Orange County, Oakland and San Jose. Source: Trulia