Washington, May 24 (AP/UNB) — Living by the beach is becoming even more cost prohibitive.
While many Americans know about the sky-high costs of housing in New York City or Seattle, affordability is increasingly the worst in areas where the wealthy vacation and a large share of local workers cater to their needs. The trend taps into the worsening economic inequality that is reshaping American society.
Roughly 78% of U.S. metro areas have seen home prices rise faster than wages, according to an Associated Press analysis of home values tracked by CoreLogic and government income data. Of the top 10 communities with the biggest gaps between home values and incomes, half were seaside. But there were also places with a growing concentration of highly-paid tech jobs.
"In places that see a widening gap, buying a house and achieving the American Dream is going to be increasingly difficult," said Ralph McLaughlin, deputy chief economist at CoreLogic. "But if you can get your foot in the door, the benefits may last for a lifetime."
The widest chasm in home prices relative to incomes was in Honolulu, followed by Los Angeles and the Hawaii city of Kahului. Other metros in the top 10 of largest gaps in affordability include Key West, Florida and Ocean City, New Jersey, both tourist destinations. Just outside the top 10 are San Diego, Santa Cruz and part of Cape Cod, Massachusetts.
Consider Ocean City. This southern stretch of the Jersey shore includes the Victorian cottages of Cape May, the sweeping mansions of Avalon and wood-planked boardwalk of Ocean City, which became a family-oriented resort destination after banning the sale of alcohol. Home prices have climbed 158% since 2000, while wages have increased just 45%.
The area balloons in size each summer with a swell of vacationers, which creates jobs during the summer. But the wealthy with summer homes — who've seen their incomes soar — often earn their fortunes elsewhere. Few restaurant employees and seasonal workers can benefit from a growing stock portfolio or lavish bonuses. So as home prices rise and income growth lags, the year-round population of the surrounding Cape May County has fallen 8.6% since 2000.
Other metro areas in the top 10 of worsening affordability include major tech hubs such as San Jose, California and Austin, Texas. The boom in parts of California has been so robust that price growth in Los Angeles, San Diego, San Francisco is now running below 2% and could turn negative, possibly narrowing the gap relative to incomes.
Rounding out the top ten are the California cities of Napa and San Luis Obispo and Boise, Idaho.
Areas where homes are still affordable relative to incomes are generally in two types of areas.
They're either in places such as the mid-size Georgia cities of Albany and Valdosta where home prices have yet to fully recover to their pre-2008 peaks.
Or, they're in places in Illinois such as Bloomington or Peoria where home prices never experienced either a surge or subsequent crash from the housing bubble, and have seen property values stay mostly flat since 2008.