ATTOM: 24% of County Housing Markets Less Affordable than Norms

ATTOM Data Solutions, Irvine, Calif., said its index of home affordability reversed course in the third quarter, with nearly one-fourth of county housing markets reporting less affordable conditions from historic norms.

The company’s third quarter Home Affordability Index showed 24 percent of U.S. county housing markets were less affordable than their historic affordability averages, up from 22 percent of markets in the previous quarter and up from 19 percent of markets a year ago to the highest share of since third quarter 2009, when 47 percent of markets were less affordable than their historic affordability averages.

Of the 414 counties analyzed, 101 (24 percent) had an affordability index below 100 in the third quarter, meaning that buying a median-priced home in that county was less affordable than the historic average for that county going back to first quarter 2005. Counties less affordable than their historic averages in the third quarter included Harris County (Houston), Texas; Kings County (Brooklyn), N.Y.; Dallas County, Texas; Bexar County (San Antonio), Texas; and Alameda County, Calif..

Counties still affordable by historic standards included Los Angeles County, Calif.; Cook County (Chicago), Ill.; Maricopa County (Phoenix), Ariz.; Miami-Dade County, Fla.; and Queens County, N.Y.

“The improving affordability trend we noted in our second quarter report reversed course in the third quarter as home price appreciation accelerated in the majority of markets and wage growth slowed in the majority of local markets as well as nationwide, where average weekly wages declined in the first quarter of this year following 13 consecutive quarters with year-over-year increases,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “This unhealthy combination resulted in worsening affordability in 63 percent of markets despite mortgage rates that are down 45 basis points from a year ago.

Blomquist noted a silver lining in that affordability improved in some of the highest-priced markets that have been “bastions of bad affordability,” mostly the result of annual home price appreciation slowing to low single-digit percentages in those markets. “This is an indication that home prices are finally responding to affordability constraints–a modicum of good news for prospective buyers who have been priced out of those high-priced markets.”

Other report highlights:
–Affordability improved in 153 counties (37 percent) compared to a year ago, including in the bellwether high-priced markets of Marin County, Calif. (1 percent improvement); Santa Clara County (San Jose), Calif. (3 percent); Kings County (Brooklyn), N.Y. (5 percent); Arlington County, Va. (5 percent); and Maui County, Hawaii (1 percent).

–Affordability worsened in 261 counties (63 percent) compared to a year ago, including Los Angeles County (2 percent worse); Harris County (Houston), Texas (3 percent); Maricopa County (Phoenix) (3 percent); Miami-Dade County (5 percent); Queens County, N.Y. (1 percent); and King County (Seattle) (2 percent).

–Annual growth in median home prices outpaced annual growth in average weekly wages in 368 of the 414 counties analyzed (89 percent), a reversal from the trend in previous quarters, when the share of counties with home price growth outpacing wage growth dropped as low as 58 percent in second quarter.

–Home prices have increased 10 times faster than wages since 2012. Across the 414 counties, the average annual change in average weekly wages was -0.1 percent while the average annual change in median home sales prices was 7 percent. Since bottoming out in Q1 2012, median home prices nationwide have risen 60 percent while average weekly wages have risen 6 percent during that same time period.

–Markets with the lowest closing costs were all in Missouri: Jasper County/Joplin ($1,720); Jackson County/Kansas City ($1,730); Greene County/Springfield ($1,738); Franklin County/St. Louis ($1,740); and Jefferson County/St. Louis ($1,745).

–Markets with the highest closing costs as a percentage of annual wages were all in the New York metro area: Kings/Brooklyn (47.2 percent); New York/Manhattan (42.6 percent); Queens (32.0 percent); Bronx (21.0 percent); and Suffolk (21.0 percent).

–Markets with the low closing costs as a percentage of annual wages were St. Louis City (3.1 percent); Saint Louis County, Mo. (3.2 percent); Durham County, N.C. (3.2 percent); Jackson County (Kansas City), Mo. (3.3 percent); and Mecklenburg County (Charlotte), N.C. (3.4 percent).

The report analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 414 U.S. counties with a combined population of more than 203 million. The affordability index is 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.