In the second quarter of 2020, median prices of single-family homes and condos have been more affordable than historic averages in 49 percent of U.S. counties, up from 31 percent the year before, according to Attom Data Solutions’ Q2 2020 U.S. Home Affordability Report.
Attom determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments (including mortgage, property taxes and insurance) on a median-priced home with a 3 percent down payment and a 28 percent maximum debt-to-income ratio. That amount of income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.
Out of those counties with sufficient data to analyze, 200 out of 406 are now more affordable, compared to 126 of the same group of counties that were affordable one year ago. Overall, higher wages paired with lower mortgage interest rates have overpowered regular price increases to create greater affordability.
However, amid increased affordability, major homeownership costs are still unaffordable to average wage earners in 74 percent of counties, costing over 28 percent of average wages.
Todd Teta | ATTOM Data Solutions
“The latest affordability numbers reveal a win-win situation for sellers as well as buyers,” Todd Teta, Attom’s chief product officer, said in a statement. Prices are rising again around the country during the current homebuying season, despite worries that the economic impact of the coronavirus pandemic would halt the nine-year runup in home values. But a combination of wage gains and declining mortgage rates are helping to override the increases and make homes more affordable in large swaths of the United States.”
Out of those 49 percent of markets more affordable than historic averages, counties with the best affordability indexes include Macon County, Illinois (index of 177); Berkshire County, Massachusetts (134); Newport News City/County, Virginia (133); Hampshire County, Massachusetts (132); and Morris County, New Jersey (130).
The biggest annual gains in affordability were seen in Berkshire County, Massachusetts (up 23 percent); Bay County, Florida (up 11 percent); Hampshire County, Massachusetts (up 10 percent); Jefferson County, Missouri (up 10 percent); and San Luis Obispo, California (up 8 percent).
During Q2 2020, median home prices have been up by at least 5 percent year-over-year in 52 percent of counties analyzed with a population of at least 100,000 and at least 50 single-family home and condo sales during the second quarter.
Counties of at least 1 million that experienced the greatest annual gains in home prices include Philadelphia County, Pennsylvania (up 22 percent); Bronx County, New York (up 13 percent); Mecklenburg County, North Carolina (up 12 percent); Dallas County, Texas (up 11 percent); and Orange County, Florida (up 10 percent).
In about two-thirds of markets home price appreciation is surpassing average weekly wage growth, while in 68 percent of counties analyzed, 30 percent of the average wages of local workers are needed to cover major homeownership costs. Those counties with the greatest percentage of average wages necessary to buy a home include Marin County, California (109.4 percent of annualized weekly wages needed); Santa Cruz County, California (98.4 percent); Kings County, New York (98.3 percent); Maui County, Hawaii (84.1 percent); and Monterey County, California (82.7 percent).
Out of the 32 percent of counties that require less than 30 percent of annualized weekly wages to buy a home, those that require the smallest percentage of wages were Macon County, Illinois (10.4 percent of annualized weekly wages needed); Rock Island County, Illinois (13.4 percent); Montgomery County, Alabama (15.1 percent); Oswego County, New York (17.9 percent); and Richmond County, Georgia (18.1 percent).
In 35 percent of markets, an annual wage of at least $75,000 is needed to afford a median-priced home. However, in the priciest markets, annual wages needed to afford the typical home are well above that number, including in New York County, New York (necessary annual wage is $341,401); San Francisco County, California ($332,317); San Mateo County, California ($326,709); Marin County, California ($289,269); and Santa Clara County, California ($282,021).
“Virus pandemic concerns are still quite valid and may show up in the coming months, which could hurt prices as well as affordability,” Teta said in a statement. “That remains a significant potential cloud hanging over the market.”