ATTOM: Home Affordability Drops to 8-Year Low in Q4

ATTOM Data Solutions, Irvine, Calif., said annual home price appreciation outpaced wage growth in 81 percent of U.S. markets in the fourth quarter, reducing home affordability to its lowest level since 2009.

The company’s Q4 Home Affordability Index fell to 103, down from 108 in the third quarter and down from 116 a year ago to the lowest level since Q4 2008 (102).

The report said 29 percent of U.S. county housing markets were less affordable than their historic affordability averages in the fourth quarter, up from 24 percent of markets in the previous quarter and up from 13 percent of markets a year ago to the highest share since Q3 2009, when 47 percent of markets were less affordable than their historic affordability averages.

“Rapid home price appreciation and tepid wage growth have combined to erode home affordability during this housing recovery, and the recent uptick in mortgage rates only accelerated that trend in the fourth quarter,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year. Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets.”

Of the 447 counties analyzed in the report, 130 counties (29 percent) had an affordability index below 100, indicating they are less affordable than their historic norms. Counties with the lowest affordability index were Cumberland County, Tenn.; (58); Genesee County, Mich. (77); Denver County, Colo. (79); Adams County, Colo.(81); and Wilson County, Tenn. (83). Most populated counties that were less affordable than their historic norms included Kings County (Brooklyn) (91); Dallas County (91); Queens County, New York (95); Tarrant County, Texas (93); and Alameda County, Calif. (93).

ATTOM said annual home price growth outpaced annual wage growth in 363 of 447 counties (81 percent), up from 77 percent of counties in the previous quarter and up from 57 percent of counties a year ago. Since bottoming out in Q1 2012, the national median home price has increased 60 percent while average weekly wages have increased just 1 percent during that same period.

Home affordability improved compared to a year ago in 81 counties (18 percent), down from 39 percent of counties with improving affordability in the previous quarter and down from 26 percent of counties with improving affordability in Q4 2015.

On average, average wage earners need to spend 36.9 percent of their income to buy a median-priced home, still below the historic average of 39.1 percent but up from 36.6 percent in the previous quarter and up from 35.2 percent a year ago.

Counties that were least affordable by this absolute affordability standard were Kings County (Brooklyn), New York (127.2 percent of average wages needed to buy a median priced home); Santa Cruz County, Calif. (113.7 percent); Marin County, Calif. (111.9 percent); Summit County, Utah (105.3 percent); and New York County (Manhattan), (102.6 percent).

Counties deemed most affordable by this absolute standard were Clayton County, Ga. (10.4 percent of average wages needed to buy a median-priced home); Roane County, Tenn. (11.8 percent); Bay County, Mich. (13.0 percent); Bibb County, Ga. (13.3 percent); and Richmond County, Ga. (14.0 percent).