Homes Are Now Less Affordable Compared to Historical Averages
A recent report by ATTOM, curator of the nation’s premier property database found that median-priced single-family homes are now less affordable when compared to historical averages in 75 percent of counties across the nation. This figure is up from the 56 percent jump that ATTOM reported in the third quarter of 2020. This is the highest percentage of counties becoming less affordable in 13 years, as home prices have increased faster than wages across much of the country.
The report calculated affordability for average wage earners across the country by calculating the amount of income that is needed to cover monthly homeownership expenses. The expenses included in their calculations are:
- Mortgage
- Property taxes
- Homeowners Insurance
The report assumed a median-priced single-family home with a 20 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. The income required to meet this debt load was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.
When ATTOM ran the numbers, median home prices in 430 of 572 counties were less affordable in the third quarter of 2021 than in the past. In 2020, only 317 counties were found to be more unaffordable than in the past. The median national home price has also shot up in 2021, skyrocketing 18 percent to set a record high of $315,500.
The report found that despite the fact that home prices may still be manageable for most homebuyers, homes are absolutely getting less affordable. The numbers showed that the major ownership costs of owning a typical home are now consuming 24.9 percent of the average national wage of $64,857 in the third quarter of this year. This represents a slight bump from the second quarter of 2021 when it was consuming 24.3 percent of a typical income. Despite the rise, these numbers all fall withing the standard debt levels that mortgage lenders prefer which is 28 percent.
“The typical median-priced home around the U.S. remains affordable to workers earning an average wage, despite prices that keep going through the roof. Super-low interests and rising pay continue to be the main reasons why,” said Todd Teta, chief product officer with ATTOM in a recent press release. “But affordability keeps inching in the wrong direction as the housing market boom keeps roaring ahead. That’s pushing average workers closer and closer to the point where lenders might be reluctant to give them a mortgage. With much still uncertain about how the pandemic and many other forces could still affect the economy, affordability remains a crucial measure of market stability that could easily keep going in the same direction or swing back the other way.”
Despite the fact that affordability is slipping, major home-ownership expenses on typical homes still fall into the affordable category (based on the 28 percent guideline) for the average wage earn in 303 of 572 counties that were examined. A few of the largest counties that are still affordable include:
- Cook County (Chicago), IL
- Harris County (Houston), TX
- Dallas County, TX
- Bexar County (San Antonio), TX
- Wayne County (Detroit), MI.
On the flip side of the coin, the largest of the 269 counties that have slipped into unaffordable territory for local workers are:
- Los Angeles County, CA
- Maricopa County (Phoenix), AZ
- San Diego County, CA
- Orange County, (outside Los Angeles), CA,
- Miami-Dade County, FL.
Home prices up in most of the country
Median single family home prices shot up by at least 10 percent in the third quarter of 2021 from the third quarter of 2020 in 381 of 572 counties or 67 percent of counties the report examined. Counties included in the report had a population of at least 100,000 and at least 50 single-family home and condo sales in the third quarter of 2021.
In large counties, those with a population of at least 1 million the largest year-over-year median prices increases occurred in the following counties:
- Middlesex County (outside Boston), MA (up 32 percent)
- Maricopa County (Phoenix), AZ (up 24 percent)
- Travis County (Austin), TX (up 23 percent)
- Hillsborough County (Tampa), FL (up 22 percent)
- Clark County (Las Vegas), NV (up 22 percent)
These are the large counties (at least 1 million population) that saw the smallest year-over-year median-price increases in the third quarter of 2021:
- New York County (Manhattan), NY (up less than 1 percent)
- Fairfax County, VA (outside Washington, DC) (up 5 percent)
- Santa Clara County (San Jose), CA (up 6 percent)
- Suffolk County, NY (eastern Long Island) (up 7 percent)
- Dallas County, TX (up 7 percent)
Home prices going up faster than wage growth in three-quarters of markets
The report also found that home price appreciation is growing faster than weekly wage growth in the third quarter of 2021 in a whopping 428 of the 572 counties analyzed in the report which translates into 75 percent of the counties being examined.
On the other hand, average annualized wage growth is growing faster than home-price appreciation in the third quarter of 2021 in 144 of the counties in the report or roughly 25 percent of counties. The largest counties where this is occurring include:
- Cook County (Chicago), IL
- San Diego County, CA; Orange County, CA (outside Los Angeles)
- Santa Clara County (San Jose), CA
- Alameda County (Oakland), CA
If you are looking for a place to live where the smallest portion of household wages are used on homeownership expenses, consider the following areas according to the report:
- Schuylkill County, PA (outside Allentown) 9.5 percent of annualized weekly wages needed to buy a home
- Fayette County, PA (outside Pittsburgh) (10.6 percent)
- Cambria County, PA (outside Pittsburgh) (10.9 percent)
- Macon County (Decatur), IL, (11.3 percent)
- Bibb County (Macon), GA (11.4 percent)
If you are looking for a larger metro area where homeownership costs consume less than 28 percent of average local wages, check out these cities:
- Wayne County (Detroit), MI (12.8 percent)
- Philadelphia County, PA (15.2 percent)
- Cuyahoga County (Cleveland), OH (16.4 percent)
- Harris County (Houston), TX (21.6 percent)
- Cook County (Chicago), IL (21.8 percent)
There are several counties that require more than 28 percent of a local wages to afford a typical home. Counties that fall into this category include:
- Kings County (Brooklyn), NY (78.7 percent of annualized weekly wages needed to buy a home)
- Santa Cruz County, CA (77.7 percent)
- Marin County, CA (outside San Francisco) (75.1 percent)
- Maui County, HI (66.2 percent)
- Monterey County, CA (outside San Francisco) (63.7 percent)
Higher than average salary required in some counties
In some counties, homebuyers will need to make more than $75,000 in annual wages to purchase a median-priced home. The report found that an annual income above $75,000 is needed in 106 counties or 19 percent of the counties that the report examined. Here are some of the highest annual wages required to afford the typical home in these counties:
- New York County (Manhattan), NY ($247,479)
- San Mateo County (outside San Francisco), CA ($246,824)
- San Francisco County, CA ($241,125)
- Marin County (outside San Francisco), CA ($232,106)
- Santa Clara County (San Jose), CA ($223,718).
On the flip side of that coin, here are a few of the counties that require the lowest annual wages to afford a median priced home in the area:
- Schuylkill County, PA (outside Allentown) ($15,834)
- Fayette County, PA (outside Pittsburgh) ($16,497)
- Cambria County, PA (outside Pittsburgh) ($16,895)
- Robeson County, NC (outside Fayetteville) ($19,358)
- Bibb County (Macon), GA ($19,471)