One in Four U.S. Housing Markets Less Affordable Than Historic Affordability Averages in First Quarter of 2017
U.S. Affordability Index Drops to a More Than 8-Year Low Despite Annual Wage Growth Outpacing Home Price Growth in 53 Percent of Local Markets
IRVINE, Calif. – March 30, 2017 — ATTOM Data Solutions, curator of the nation’s largest fused property database, today released its Q1 2017 U.S. Home Affordability Index, which shows that one in every four county housing markets analyzed for the report were less affordable than their historic affordability averages in the first quarter of 2017.
A total of 95 counties out of 379 counties analyzed for the report (25 percent) posted an affordability index below 100 in Q1 2017 — 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 (see full methodology below).
Nationally the affordability index in the first quarter of 2017 was 103, down from 108 in the previous quarter and down from 119 a year ago to the lowest level since Q4 2008 — a more than eight-year low. The index of 103 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 at 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.”
More than 43 percent of average wages needed to buy a home in 97 counties
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 (CFPB) — to buy a median-priced home in 97 of the 379 counties (26 percent) analyzed for the report.
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. “The data also shows that the affordability level in King County has eroded to levels we haven’t seen since 2010. Moreover, I believe that 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.”
5 counties where buying a home requires more than 100 percent of average wages
Average wage earners would need to spend more than 100 percent of their income to buy a median-priced home in five of the 379 counties analyzed:
- Kings County (Brooklyn), New York (121.4 percent)
- Santa Cruz County, California (111.9 percent)
- Marin County, California (109.9 percent)
- New York County (Manhattan), New York (100.5 percent)
- Maui County, Hawaii (100.2 percent).
12 counties where buying a home requires less than 15 percent of average wages
Average wage earners would need to spend less than 15 percent of their income to buy a median-priced home in 12 of the 379 counties analyzed:
- Clayton County, Georgia, in the Atlanta metro area (10.8 percent)
- Baltimore City, Maryland (11.8 percent)
- Bibb County, Georgia, in the Macon metro area (12.2 percent)
- Saginaw County, Michigan, in the Saginaw metro area (12.4 percent)
- Trumbull County, Ohio, in the Youngstown metro area (12.5 percent)
- Wayne County, Michigan, in the Detroit metro area (12.6 percent)
- Richmond County, Georgia, in the Augusta metro area (14.2 percent)
- Cuyahoga County, Ohio in the Cleveland metro area (14.4 percent)
- Saint Lawrence County, New York, in the Ogdensburg-Massena metro area (14.6 percent)
- Summit County, Ohio, in the Akron metro area (14.7 percent)
- Greene County, Ohio, in the Dayton metro area (14.7 percent)
- Milwaukee County, Wisconsin (14.8 percent).
“Consumer confidence is increasing, as we are seeing a year-over-year wage increase. The wage increase, coupled with shortage of inventory, is creating a market where we are seeing median home prices increase over historic pricing,” said Matthew Watercutter, senior regional vice president and broker of record for HER Realtors, covering the Dayton, Columbus and Cincinnati markets in Ohio. “This is good news for sellers, but there is still great news for buyers. The percentage of wages needed to buy have decreased, which shows the median wages are growing at a faster pace than the sales prices. This means that Central, Western and Southwestern Ohio are still among the most affordable places to live in the nation.”
Wage growth outpaces home price growth in 53 percent of counties
Annual wage growth outpaced annual growth in median home prices in 199 of the 379 counties (53 percent) analyzed in the report. It was 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. A total of 363 of the 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.
Affordability improves from a year ago in 9 percent of counties
Counter to the national trend, affordability improved compared to a year ago in 35 of the 379 counties (9 percent) analyzed in the report. Annual wage growth outpaced home price growth in all 35 of the counties with improving affordability.
Counties with improving affordability included Kings County (Brooklyn), New York; Fulton County, Georgia in the Atlanta metro area; San Francisco County, California; Delaware County, Pennsylvania, and New Castle County, Delaware in the Philadelphia metro area; and Summit County, Ohio in the Akron metro area.
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 379 U.S. counties with a combined population of more than 203 million. The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate mortgage and a 3 percent down payment, including property taxes, home insurance and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments. Only counties with sufficient home price and wage data quarterly back to Q1 2005 were used in the analysis.
About ATTOM Data Solutions
ATTOM Data Solutions is the curator of the ATTOM Data Warehouse, a multi-sourced national property database that blends property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property characteristic data for more than 150 million U.S. residential and commercial properties. The ATTOM Data Warehouse delivers actionable data to businesses, consumers, government agencies, universities, policymakers and the media in multiple ways, including bulk file licenses, APIs and customized reports.
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