ATTOM: Home Affordability Increases in 2Q

ATTOM Data Solutions, Irvine, Calif, said its second-quarter U.S. Home Affordability Report showed median home prices of single-family homes and condos became more affordable than historical averages in 49 percent of U.S. counties, up from 31 percent a year ago.

Compared to historical levels, ATTOM said 200 of the 406 counties analyzed in the second quarter are now more affordable, up from 126 of the same group of counties a year ago. The gains have come as higher wages, along with cheaper mortgage costs resulting from declining interest rates, outweigh ongoing price increases that commonly have exceeded 5 percent in the current quarter.     

But ATTOM Chief Product Officer Todd Teta said despite improved buying conditions, major costs on median-priced homes remain unaffordable to average wage earners in 74 percent of counties included in the second quarter analysis, with major home ownership costs consuming more than 28 percent of average wages from county to county.

“The latest affordability numbers reveal a win-win situation for sellers as well as buyers,” Teta said. “Prices are rising again around the country during the current home-buying season, despite worries that the economic impact of the coronavirus pandemic would halt the nine-year runup in home values. But a combination of wage gains and declining mortgage rates are helping to override the increases and make homes more affordable in large swaths of the United States. Virus pandemic concerns are still quite valid and may show up in the coming months, which could hurt prices as well as affordability. That remains a significant potential cloud hanging over the market. But as of now, things are looking up for people on both sides of the buying equation.”

The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance — on a median-priced home, assuming a 3 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics

Key report findings:

–Median home prices in the second quarter rose by at least 5 percent from a year ago in 210, or 52 percent, of the 406 counties included in the report. Biggest year-over-year price gains are in Philadelphia County, Pa. (22 percent); Bronx County, N.Y. (13 percent); Mecklenburg County (Charlotte), N.C. (12 percent); Dallas County, Texas (11 percent) and Orange County (Orlando), Fla. (10 percent).

–Home price appreciation is outpacing average weekly wage growth in the second quarter in 269 of the 406 counties (66 percent.

–Average annualized wage growth is outpacing home price appreciation in the second quarter in 137 of the 406 counties (34 percent.

–Major ownership costs on the median-priced home in the second quarter consume at least 30 percent of the average wages of local workers in 276 of the 406 counties (68 percent).

–130 counties in the report (32 percent) require less than 30 percent of their annualized weekly wages to buy a home in the second quarter. Those counties that require the smallest percent include Macon County (Decatur), Ill. (10.4 percent); Rock Island County (Davenport), Ill. (13.4 percent); Montgomery County, Ala. (15.1 percent); Oswego County (outside Syracuse), N.Y. (17.9 percent) and Richmond County (Augusta), Ga. (18.1 percent).

–Among 41 counties in the report with a population of at least 1 million, the only ones where home ownership consumes less than 30 percent of average local wages are Cuyahoga County (Cleveland), Ohio (18.6 percent); Philadelphia County, Pa. (21.2 percent); Harris County (Houston), Texas (26.2 percent); Fulton County (Atlanta), Ga. (27.8 percent) and Oakland County (outside Detroit), Mich. (27.8 percent).

–Average wage needed to afford median-priced home exceeds $75,000 in a third of markets.

–An annual wage of at least $75,000 is needed to afford the typical home in 141, or 35 percent, of the 406 markets.