ATTOM: One in Four Housing Markets Less Affordable

ATTOM Data Solutions, Irvine, Calif., said its U.S. Affordability Index fell to an eight-year low in the first quarter, with one in four housing markets less affordable than historic affordability averages.

The report said 95 of 379 counties analyzed for the report (25 percent) posted an affordability index below 100 in the first quarter, the highest share of markets below the normal affordability index of 100 since Q4 2009. An affordability index below 100 means that the share of averages wages needed to buy a median-priced home is above the historic average for a given market.

Nationally the affordability index in the first quarter fell to 103, down from 108 in the third quarter and down from 119 a year ago to its lowest level since Q4 2008. The index translates to 33.6 percent of average weekly wages needed to buy a median-priced home nationwide, below the historic average of 34.6 percent but the highest share of wages needed since Q4 2008.

“Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

The report said average wage earners would need to spend more than 43 percent of their income–the maximum debt-to-income ratio allowed for a “qualified mortgage” under guidelines from the Consumer Financial Protection Bureau–to buy a median-priced home in 97 of the 379 counties (26 percent) analyzed.

Markets above the 43 percent threshold included Los Angeles, San Diego, Orange, Riverside and San Bernardino counties in southern California; Kings (Brooklyn), Queens, New York (Manhattan) and Bronx counties in New York City; King and Snohomish counties in the Seattle metro area; Santa Clara, Alameda, Contra Costa, San Francisco, San Mateo and Marin counties in the Bay Area of northern California; and nine counties in the Washington, D.C. metro area.

“Many homebuyers have been priced out of the Seattle housing market, forcing them to buy in other counties and commute,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle housing market, where all three counties in the metro area posted worsening affordability compared to a year ago, noting the affordability level in King County (Seattle) eroded to levels not seen since 2010. “It will get worse before it gets better thanks, to our growing population, inadequate infrastructure and land constraints, which are all driving up home prices in and around the Seattle area.”

The report said average wage earners would need to spend more than 100 percent of their income to buy a median-priced home in five counties: Kings County (Brooklyn), N.Y. (121.4 percent); Santa Cruz County, Calif. (111.9 percent); Marin County, Calif. (109.9 percent); New York County (Manhattan (100.5 percent); and Maui County, Hawaii (100.2 percent).

Conversely, average wage earners would need to spend less than 15 percent of their income to buy a median-priced home in 12 counties: Clayton County, Ga. (10.8 percent); Baltimore City, Md. (11.8 percent); Bibb County, Ga. (12.2 percent); Saginaw County, Mich. (12.4 percent); Trumbull County, Ohio (12.5 percent); Wayne County, Mich. (12.6 percent); Richmond County, Ga. (14.2 percent); Cuyahoga County, Ohio (14.4 percent); Saint Lawrence County, N.Y. (14.6 percent); Summit County, Ohio (14.7 percent); Greene County, Ohio (14.7 percent); and Milwaukee County, Wis. (14.8 percent).

The report said annual wage growth outpaced annual growth in median home prices in 199 counties (53 percent), the highest percentage of counties with wage growth outpacing home price growth since home prices bottomed out nationwide in Q1 2012.

In contrast to the trend over the past year, however, home price growth has consistently outpaced wage growth over the past five years of the housing recovery. The report said 363 of 379 counties (96 percent) have seen home prices rise at a faster pace than wages since hitting bottom, and nationwide median home prices have increased 57 percent since hitting bottom in Q1 2012 while average weekly wages have increased 4 percent during the same time period.

Counter to the national trend, ATTOM said affordability improved compared to a year ago in 35 counties (9 percent). Annual wage growth outpaced home price growth in all 35 of the counties with improving affordability. Counties with improving affordability included Kings County, N.Y.; Fulton County, Ga.; San Francisco County; Delaware County, Pa., and New Castle County, Del.; and Summit County, Ohio.