Count yourself fortunate if you live in one of the four counties – among 578 studied – where home prices are more affordable than they used to be. For almost everyone else, affordability has worsened across the nation, with significant increases in home prices even between the second and third quarters of this year.
According to a new analysis by ATTOM, “The nationwide median price of single-family homes and condos is up 2% [from $344,000] in the second quarter, to a new record of $351,250.” In comparison to $329,813 in 3Q 2022, the increase is 6.5%. As a result, homebuyers are having to give up an average 35% of their income to get a loan – up from the historical average of 28%.
The 574 counties where homes are less affordable is double the number that were less affordable two years ago. The analysis is based on data from counties with a population of at least 100,000 and at least 50 single-family homes and condos sales in 3Q 2023.
One reason homes are increasingly out of reach is price and interest rate increases, among other factors, that are boosting the typical cost of home ownership faster than wage hikes.
Annual price appreciation outpaced wage gains in 47% of counties in the third quarter, compared to the prior year. In 53% of counties, wages held their own against house price increases.
“With basic homeownership now soaking up more than a third of average pay, the stage is set for some potential buyers to be priced out, which would reduce demand and upward pressure on prices,” said ATTOM CEO Rob Barber.
The report assessed affordability based on a 20% downpayment and a 28% front-end ‘debt-to-income’ ratio – historically, the lending standard – and compared it to federal wage data. By this measure, it found major home-ownership expenses on typical homes were unaffordable to average local wage earners during 3Q 2023 in more than three-quarters, of the 578 counties studied. Three of the counties with the largest populations facing unaffordable costs were in California (Los Angeles, San Diego and Orange County), while Cook County, IL and Maricopa County, AZ were also in the mix.
“The typical $2,053 costs of mortgage payment, homeowner insurance, mortgage insurance and property taxes nationwide exceeds $2,000 for the first time ever. It now consumes 34.6% of the average annual national wage of $71,214,” ATTOM reported. That is up from 32.3% in the previous quarter.
Among the 47 counties with a population of at least one million, the biggest annual increase in median prices in 3Q 2023 was recorded in Fulton, GA, where prices shot up 23%. It was followed by St. Louis, MO (up 14%). Miami-Dade, FL, Orange County and Palm Beach, FL. Prices fell, however, in million-plus population counties like Travis, TX, Honolulu, HI, Clark, NV, and Sacramento, CA.
Residents of counties in the Northeast and west coast – especially California — have to fork over the highest percentage of their wages to buy a home. Counties where the bite out of wages is least felt – below 17% — include Macon, IL, Schuylkill, PA, Wayne, MI, Peoria, IL, and Montgomery, AL.
What the future holds is uncertain, Barber noted. It will depend on how competing forces – rising home values, mortgage rates that are beginning to stabilize, the stock market, and inflation – play out. “Those shifting sands both help and hurt the buying power of house hunters, which could send affordability numbers either direction” he noted.