The median home price of $252,500 was unaffordable for average wage earners in 66 percent of U.S. counties in the first quarter of 2020, according to Attom Data Solutions’ Q1 2020 U.S. Home Affordability Report.
Although that’s a majority of earners, it’s less than the number for whom the median home price was unaffordable in the previous quarter (70.4 percent in Q4 2019) and for the same period last year (69.8 percent in Q1 2019).
Attom determined affordability by calculating the amount needed to make monthly house payments on a median-priced home (assuming a 3 percent down payment and 28 percent debt-to-income ratio) and compared this to average weekly wage data from the Bureau of Labor Statistics.
Attom’s report also showed that owning a median-priced home consumes 31.1 percent of the national wage as of Q1 2020, compared to 31.4 percent in Q4 2019 and 31.6 percent in Q1 2019. That number is at its lowest point since Q4 2017 when average workers used 30.8 percent of their wages in order to own a home. Furthermore, the report found that in more than half of markets, at least 30 percent of wages are needed to buy a home.
“Home affordability has inched ahead this year across the United States as buying a house or a condo gets closer and closer to the level where the average wage earner can swing the deal within standard lending guidelines,” Todd Teta, chief product officer at Attom Data Solutions, said in a statement.
“While the national median price still remains a bit out of reach for the average wage earner, the affordability gap has narrowed to the smallest point in more than two years,” Teta added. “It seems bizarre that median home prices have risen 8 percent over the past 12 years while average wages grew by less than half that amount. But falling interest rates continue making up the difference, dropping monthly home ownership payments in a majority of the country.”
Many of the most densely populated counties where a median-priced home was unaffordable for average wage earners were in the West or Southwest parts of the country, including Los Angeles, San Diego and Orange Counties in California; Maricopa County, Arizona; and Miami-Dade County, Florida. In these counties, and in 64 percent of markets, home price appreciation outpaced the average weekly wage growth in Q1 2020.
In 34 percent of counties, a median-priced home was affordable for the quarter, including Cook County, Illinois; Harris and Dallas Counties in Texas; Wayne County, Michigan; and Philadelphia County, Pennsylvania.
Two-thirds of markets made gains in affordability in Q1 2020 compared to their historic averages. In contrast, in Q4 2019, only 55.1 percent of markets were more affordable than historic averages. Madison County, Indiana (affordability index of 186); Baltimore City/County, Maryland (index of 159); Mercer County, New Jersey (index of 159); Peoria County, Illinois (index of 149); and Onslow County, North Carolina (index of 145) measured the highest affordability indexes.
Those counties that saw the greatest annual gains in affordability included Johnson County, Indiana (index gain of 41 percent); Butte County, California (gained 36 percent); Niagara County, New York (gained 35 percent); Onondaga County, New York (gained 27 percent); and Saint Clair County, Illinois (gained 26 percent).
Out of the one-third of markets that decreased in affordability compared to historic averages, those that saw the greatest drops in affordability included Madison County, Indiana (down 54 percent); Bibb County, Georgia (down 17 percent); Warren County, New Jersey (down 16 percent); Saint Louis City/County, Missouri (down 15 percent); and Erie County, Pennsylvania (down 14 percent).
Although the big picture of home affordability looked positive for Q1 2020, the effects of the coronavirus pandemic had not yet made their full impact on the market.
“All that may change in a huge way over the next few months as the impact of the coronavirus hits the housing market,” Teta said. “We are entering a period of great uncertainty. But, in the initial months of the year, the picture has appeared to continue to brighten for home seekers.”