Average Wage-Earners Can’t Afford Median-Priced Homes In Majority of U.S. Markets
Home prices are less affordable than the historic average in 49 percent of local markets; 65 percent of markets less affordable than a year ago.
Median home prices in the first quarter of 2019 were not affordable for average wage earners in 335 of 473 U.S. counties analyzed in the report (71 percent), according to ATTOM Data Solutions’ Q1 2019 U.S. Home Affordability Report.
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.
The 335 counties where a median-priced home in the first quarter was not affordable for average wage earners included Los Angeles County, Calif.; Maricopa County (Phoenix), Ariz.; San Diego County, Calif.; Orange County, Calif.; and Miami-Dade County, Fla.
The 138 counties (29 percent of the 473 counties analyzed in the report) where a median-priced home in the first quarter was still affordable for average wage earners included Cook County (Chicago), Ill.; Harris County (Houston), Texas; Wayne County (Detroit), Mich.; Philadelphia County, Pa.; and Cuyahoga County (Cleveland), Ohio.
View Q1 2019 U.S. Home Affordability Heat Map by County
“We are seeing a housing market in flux across the United States, with a mix of tailwinds and headwinds that are pricing many people out of the housing market, but also are creating potentially better conditions for buyers,” said Todd Teta, chief product officer with ATTOM Data Solutions. “Continually rising home prices in many areas do remain a financial stretch – or simply unaffordable – for a majority of households.
However, quarterly wage gains have been outpacing prices increases for more than a year and mortgage rates are falling, which have helped make homes a bit more affordable now, than they’ve been in a year. Affordability may improve because of the simple fact that homes are out of reach for so many home seekers, suggesting that prices need to moderate down in order to attract buyers.
Of course, a few quarters do not a long-term trend make. The economy could slow. The impact of last year’s tax cuts could fade, and interest rates could go back up, but the signs point to the possibility of an impending buyers’ market.”
49 percent of markets less affordable than historic averages
Among the 473 counties analyzed in the report, 232 (49 percent) were less affordable than their historic affordability averages in the first quarter of 2019, down from 76 percent of counties in the previous quarter but up from 42 percent of counties in the first quarter of 2018.
Counties that were less affordable than their historic affordability averages included Los Angeles County, California; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; San Diego County, California; and Orange County, California.
Most affordable counties in Atlantic City, Baltimore, Philadelphia, Cleveland Among the 473 counties analyzed in the report, 241 (51 percent) were more affordable than their historic affordability averages in the first quarter of 2019, including Cook County (Chicago), Illinois; Miami-Dade County, Florida; Santa Clara (San Jose), California; Middlesex (Boston), Massachusetts; and Suffolk County (New York), New York.
Counties with the highest affordability index were Warren County (Allentown), New Jersey (151); Mercer County (Trenton), New Jersey (147); Cumberland (Vineland), New Jersey (144); Onslow (Jacksonville), North Carolina (142); and Litchfield (Torrington), Connecticut (139).
65 percent of markets post worsening affordability compared to year ago
A total of 308 of the 473 counties analyzed in the report (65 percent) posted a year-over-year decrease in their affordability index, meaning that home prices were less affordable than a year ago, including Los Angeles County, California; Harris County, Texas; Maricopa County, Arizona; San Diego County, California; and Riverside County, California.
A total of 165 of the 473 counties analyzed in the report (35 percent) posted a year-over-year increase in the affordability index, meaning that home prices were more affordable than a year ago, including Cook County (Chicago), Illinois; Orange County, California; Miami-Dade County, Florida; Kings County (Brooklyn), New York; and Dallas County (Dallas-Fort Worth), Texas.
Highest share of income needed to buy in Brooklyn, Manhattan, San Francisco, Maui
Nationwide an average wage earner would need to spend 32.7 percent of his or her income to buy a median-priced home in the first quarter of 2019, on par with the historic average of 32.7 percent of income.
Counties where an average wage earner would need to spend the highest share of income to buy a median-priced home in Q1 2019 were Kings County (Brooklyn), New York (115.9 percent); New York County (Manhattan), New York (115.0 percent); Santa Cruz County, California (114.1 percent); Marin County, California in the San Francisco metro area (103.1 percent); and Maui County, Hawaii (100.7 percent).
Counties where an average wage earner would need to spend the lowest share of income to buy a median-priced home were Bibb County (Macon), Ga. (11.1 percent); Baltimore City, Md. (12.4 percent); Wayne County (Detroit), Mich. (13.2 percent); Rock Island County (Quad Cities), Ill. (13.5 percent); and Montgomery County, Ala. (13.9 percent).
Home price appreciation outpacing wage growth in 49 percent of markets
Home price appreciation outpaced average weekly wage growth in 232 of the 473 counties analyzed in the report (49 percent), including Maricopa County (Phoenix), Arizona; Queens County, New York; San Bernardino County (Riverside), California; Clark County (Las Vegas), Nevada; and Tarrant County (Dallas-Fort Worth), Texas.
Average weekly wage growth outpaced home price appreciation in 241 of the 473 counties analyzed in the report (51 percent), including Los Angeles County, Calif.; Cook County (Chicago), Ill.; Harris County (Houston), Texas; San Diego County, Calif.; and Orange County, Calif.
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.
For instance, the nationwide median home price of $237,500 in the first quarter of 2019 would require an annual gross income of $66,336 for a buyer putting 3 percent down and not exceeding the recommended “front-end” debt-to-income ratio of 28 percent — meaning the buyer would not be spending more than 28 percent of his or her income on the house payment, including mortgage, property taxes and insurance.
That required income is higher than the $56,823 annual income earned by an average wage earner based on the most recent average weekly wage data available from the Bureau of Labor Statistics, making a median-priced home nationwide not affordable for an average wage earner.
