Median home prices of single-family homes and condos are now less affordable than historical averages in 63 percent of counties with sufficient data to analyze, up from 54 percent one year ago, according to Attom Data Solutions’ Q3 2020 U.S. Home Affordability Report.
Affordability was determined by calculating the amount of income necessary to make monthly house payments on a median-priced home (including mortgage, property taxes and insurance), assuming a 20 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. Attom then compared that income to annualized average weekly wage data from the Bureau of Labor Statistics.
Home prices have risen in many areas as demand in the housing market has skyrocketed during the coronavirus pandemic. Third-quarter data from Attom revealed that those price increases have helped contribute to a significant decrease in affordability — 308 of 487 counties analyzed are now less affordable than historical levels, up from 262 counties in Q3 2019.
“In a year when nothing is normal, owning a single-family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the opposite way,” Todd Teta, chief product officer with Attom, said in a statement. “Wages are up and mortgage rates are down to rock-bottom levels, which should work in favor of homebuyers.”
“On top of that, the American economy has suffered greatly since the coronavirus pandemic began surging of the winter — a plight that normally would drop home demand and home prices,” Teta continued. “But those same low mortgage rates, along with other factors, have led a lot of buyers into the market chasing a reduced supply of homes. The result is price hikes have raced past the impact of wages and mortgage rates.”
The largest counties where the median home price is not affordable for average wage earners include Los Angeles County, California; Maricopa County (Phoenix), Arizona; San Diego County, California; Orange County (outside Los Angeles), California; and Miami-Dade County, Florida.
Conversely, counties where median-priced homes are affordable for average local wage earners include Cook County (Chicago), Illinois; Harris County (Houston), Texas; Philadelphia County, Pennsylvania; Hillsborough County (Tampa), Florida; and Cuyahoga County (Cleveland), Ohio.
In 52 percent of counties analyzed, third-quarter median home prices are up by at least 10 percent year over year. The largest increases in home prices have taken place in Philadelphia County, Pennsylvania (up 20 percent); Franklin County (Columbus), Ohio (up 16 percent); Contra Costa County (outside San Francisco), California (up 15 percent); Maricopa County (Phoenix), Arizona (up 14 percent); and Mecklenburg County (Charlotte), North Carolina (up 14 percent).
During this quarter, home price appreciation has outpaced average weekly wage growth in a whopping 87 percent of counties analyzed. Some of the few counties where wage growth is outpacing home price appreciation include Kings County (Brooklyn), New York; Queens County, New York; New York County (Manhattan), New York; Bronx County, New York; and Honolulu County, Hawaii.
In 23 percent of markets analyzed, homeowners need an average annual wage of more than $75,000 in order to afford the typical home, with the highest wages needed in New York County, New York ($308,015); San Francisco County, California ($292,474); San Mateo County (outside of San Francisco), California ($289,064); Marin County (outside San Francisco), California ($284,052); and Santa Clara County (San Jose), California ($251,534).
Overall, Attom’s analysis determined that counties with the best affordability indexes currently include Luzerne County (Wilkes-Barre), Pennsylvania (index of 148); Macon County (Decatur), Illinois (136); Sussex County (outside New York City), New Jersey (131); Butte County (Chic0), California (130) and Schuylkill County (outside Allentown), Pennsylvania (130).