PANAMA CITY — The Panama City housing market is unaffordable for local homebuyers, according to an analysis by the Federal Home Loan Mortgage Corp., also known as Freddie Mac.
The Panama City-Lynn Haven-Panama City Beach metropolitan area was one of 52 in the U.S. deemed unaffordable in the third quarter of 2014 by Freddie Mac, which categorized an additional 112 metro areas as affordable.
The area scored a 96 on the agency’s housing affordability index, just short of the baseline of 100.
“A value of 100 would mean a family earning the median income in that area would just be able to afford a median-priced home,” said Leonard Kiefer, deputy chief economist for Freddie Mac. “The median house price in Panama City is relatively low compared to other markets, but also the median income is a bit lower. If you’re earning the median income in Panama City, you will come up a little short to affording the median priced home.”
With Bay County’s median home price at $178,000, the report calculated the monthly payment cost for the typical homebuyer at $1,104, taking into account a 10 percent down payment, an average mortgage rate of 4.14 percent, and taxes and insurance at 2.18 percent of the home’s value.
Loan underwriting standards dictate that housing-related expenses account for no more than 28 percent of a household’s gross monthly income, and with just $1,061 available, the report says the typical Bay County family cannot afford that monthly payment.
According to the report, the Destin and Pensacola areas were both deemed affordable in the third quarter, carrying index scores of 107 and 115, respectively. Tallahassee scored lower than Panama City, with an index score of 94.
With more than 1,000 miles of coastline in Florida, the state’s metro areas typically rank lower on the affordability index, Kiefer said.
“We look at the coast of the country, and those areas tend to have the lower levels of affordability,” Kiefer said.
Freddie Mac, a private, government-sponsored mortgage company, began constructing affordability maps when interest rates spiked last summer, following a period of record-high affordability the previous year.
“We’ve had a little bit of turbulence in rates,” Kiefer said. “We were really interested in seeing what rising rates would do.”
So far this year, Kiefer said the general trend in the U.S. has been for mortgage rates to fall a bit, while the price of housing continues to climb.
Keith Hodges, president of the Bay County Association of Realtors, said the same is true locally.
“Our prices ... they’re increasing rather strongly,” Hodges said. “Our sales price has gone to $209,000, as an average in Bay County. For years, that was $160,00 to $175,000 or so.”
At the end of the third quarter, Bay County’s average sale price for single-family homes rose to $209,494, up from $196,336 a year earlier. The number of new closed sales and new pending sales also increased year over year.
Hodges said the area has seen a healthy percentage of first-time homebuyers, but a majority of sales are still dominated by second-home purchases.
“The beach here, that insulates us from a lot of this stuff,” Hodges said of the affordability index. “That’s a question of, is the average pay here going to warrant the average worker to buy a house?”
No wage growth
While the Bay County real estate market has begun to rebound in recent years, wages have not.
According to inflation-adjusted wage data from the U.S. Bureau of Labor Statistics, the average Bay County worker actually took home less money last year than in 2003.
The 2013 average weekly wage of $687 was $22 less than a decade earlier. The average annual wage also showed about a 3 percent decline, from $36,876 to $35,711.
Nationwide, the percentage of first-time homebuyers also has continued to decline.
According to the National Association of Realtors 2014 Profile of Home Buyers and Sellers, first-time homebuyers accounted for just 33 percent of sales, the lowest it’s been in nearly 30 years.
Despite stagnant wages, Brigette Yeager, a mortgage loan originator for Hancock Bank in Panama City, said there are still financing options available for first-time homebuyers and lower-income families.
On Wednesday, Yeager discussed a new Freddie Mac product called “Home Possible Advantage,” an affordable mortgage offering low down payment options.
“There are lots of first-time homebuyer programs, 100 percent financing; there’s all kinds of things,” Yeager said. “Every loan is different.”
Kiefer also communicated a bright outlook for 2015.
“We’ve done a lot of looking ahead,” he said. “We expect the economy to continue to get better; we expect the job market to improve, so that should bode well for the housing market next year.”
Freddie Mac's full housing affordability map: www.freddiemac.com/blog/research_and_analysis/20141114_searching_for_affordable_homes.html