Home Affordability Slips Again

ATTOM, Irvine, Calif., reported median-priced single-family homes are less affordable compared to historical averages in 75 percent of counties across the nation with enough data to analyze.

That figure–the highest in 13 years–increased from 56 percent of counties in third-quarter 2020 as home prices have increased faster than wages in much of the country, the ATTOM U.S. Home Affordability Report said.

Despite the increase, the typical median-priced home around the U.S. remains affordable to workers earning an average wage, said Todd Teta, Chief Product Officer with ATTOM. “Super-low interests and rising pay continue to be the main reasons why,” he said. “But affordability keeps inching in the wrong direction as the housing market boom keeps roaring ahead. That’s pushing average workers closer and closer to the point where lenders might be reluctant to give them a mortgage.”

Teta noted much remains uncertain about how the pandemic and other forces could affect the economy. “Affordability remains a crucial measure of market stability that could easily keep going in the same direction or swing back the other way,” he said.

The report determined affordability for average wage earners by calculating the amount of income needed to meet monthly home ownership expenses, including mortgage, property taxes and insurance on a median-priced single-family home. It assumes a 20 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. It compared that required income wage data from the Bureau of Labor Statistics.

Compared to historical levels, median home prices in 430 of the 572 counties analyzed in the third quarter were less affordable than past averages. That figure increased from 317 of the same group of counties a year ago–a downturn that developed as the median national home price shot up 18 percent to a record-high $315,500. “While major ownership costs on median-priced homes do remain within the financial means of average workers across the nation in the third quarter of 2021, the percentage of counties where affordability is worse than historical averages has hit its highest point since the third quarter of 2008,” the report said.