RealtyTrac: 9% of Housing Markets Less Affordable in 1Q

RealtyTrac, Irvine, Calif., said 9 percent of U.S. county housing markets were less affordable than their historically normal levels in the first quarter, up from 2 percent of markets that exceeded historic home affordability levels a year ago.

The company’s Q1 2016 Home Affordability Index of 456 counties said 43 counties (9 percent) had an affordability index below 100 in the first quarter, meaning buying a home was less affordable than the historically normal level for that county going back to first quarter 2005. That was up from 10 counties (2 percent) exceeding historically normal home affordability levels in first quarter 2015.

At the peak of the housing bubble in Q2 2006, 454 of 456 counties analyzed (more than 99 percent) were less affordable than their historic norms. In Q1 2012, when median home prices bottomed out nationally, only two counties (less than one-half percent) exceeded their historically normal affordability levels.

“While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” said Daren Blomquist, senior vice president with RealtyTrac. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.”

The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment, including property taxes and insurance.

The report said the top 20 county housing markets least affordable in the first quarter compared to their historic affordability norms included counties in Denver; New York City; Omaha, Neb.; Austin, Texas; Dallas; San Francisco; and St. Louis. The five most-populated county housing markets less affordable than their historic norms were Kings County, N.Y. (Brooklyn); Dallas County, Texas; New York County, N.Y. (Manhattan); Alameda County, Calif. (Oakland); and Oakland County, Mich. in the Detroit metro area.

RealtyTrac reported the top 20 county housing markets most affordable in the first quarter of 2016 compared to their historic affordability norms included counties in Boston; Baltimore; Birmingham, Ala.; Providence, R.I.; and Chicago. The five most-populated county housing markets still more affordable than their historic norms were Los Angeles County, Calif.; Cook County, Ill. (Chicago); Harris County, Texas (Houston); Maricopa County, Ariz. (Phoenix); and San Diego County, Calif. (San Diego).

Other report findings:
–In the first quarter, the average wage earner needed to spend 30.2 percent of monthly wages to make monthly mortgage payments (including property taxes and insurance) on a median-priced home ($199,000), up from 26.4 percent of average wages needed to buy a median-priced home in first quarter. When home prices were most affordable nationwide in Q1 2012, the average wage earner needed to spend 22.2 percent of monthly wages to buy a median-priced home. When home prices were least affordable nationwide in Q2 2006, the average wage earner needed to spend 53.2 percent of monthly wages to buy a median priced home.
–Annual change in median home prices in the first quarter outpaced annual change in average weekly wages in third quarter 2015 (the most recent county-level wage data available from BLS) in 276 of the 456 counties analyzed for the report (61 percent).
–Annual change in average weekly wages outpaced annual change in median home prices in 180 of the 456 markets analyzed for the report (39 percent).