Ownership costs for the median home remain within a normal range but are nearing the point where lenders might start to balk.

Low mortgage rates and rising incomes have kept monthly housing costs largely within affordable levels, but those costs have been creeping closer to the limits of what lenders recommend.

The main costs of owning a typical home reached nearly 25 percent of the average U.S. wage in the third quarter of the year — up from 24 percent the previous quarter and 22 percent at the same point in 2020, according to a new report from Attom Data Solutions.

“​​That’s pushing average workers closer and closer to the point where lenders might be reluctant to give them a mortgage,” Attom Chief Product Officer Todd Teta said in the report. “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.”

Traditionally, lenders have wanted to see borrowers keep their major home costs — mortgage payment, property taxes and home insurance — within 28 percent of the amount of money they bring in each year. This helps ensure the borrower is in a position to make the payments on the loan.

But as Attom’s data shows, low interest rates and rising incomes have not been enough to completely stave off the effects of America’s runaway home price growth over the past year. Home prices are up 18 percent year over year, reaching a record high of $315,500 for the median home.

After accounting for income growth, the costs of home ownership became less affordable than their historical averages in 3 in 4 counties in the U.S. This time last year, just over half of counties had saw homeownership costs less affordable than their historical averages.

This level of change in the nation’s housing affordability is high but not historic. A similar share of counties was deemed less affordable than historical averages in the third quarter of 2008, Attom said.

“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,” Teta said in the report. “Super-low interests and rising pay continue to be the main reasons why. But affordability keeps inching in the wrong direction as the housing market boom keeps roaring ahead.”

Email Daniel Houston

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