U.S. homes at their least affordable for 10 years

October 11, 2018 1:39 pm

U.S. homes are at their least affordable for 10 years, new figures show. But Cape Coral is less expensive than many.

Buyers in one in seven counties now need an income of over $100,000 to be able to buy a property. So says information specialist, ATTOM Data Solutions.

Cape Coral is more affordable. Median prices in Cape Coral are $217,500. This means that an annual income of $64,874 is needed to buy, according to the Q3 2018 Home Affordability Report.

Least affordable for 10 years

Nationwide, the Q3 2018 home affordability index was 92. This is down from 95 in the previous quarter and 102 one year earlier. It’s the lowest level since Q3 2008, when the index was 87.

In 78% of the 440 United States counties analysed, including Cape Coral, the index fell below 100. This means homes were less affordable than the long-term affordability averages for the county.

Daren Blomquist, senior vice president at ATTOM Data Solutions, tells why homes are at their least affordable for 10 years. “Rising mortgage rates have pushed home prices to the least affordable level we’ve seen in 10 years, both nationally and at the local level”

“Close to one-third of the U.S. population now lives in counties where buying a median-priced home requires at least $100,000 in annual income based on our analysis of 440 counties with a combined population of 220 million. U.S. Census net migration data shows negative net migration in more than two-thirds of those highest-priced markets, while more than three-quarters of markets requiring annual income less than $100,000 to buy a home posted positive net migration, indicating that home affordability is at least one factor driving recent migration patterns.”

Nationwide, the median home price of $250,000 in Q3 2018 was up 6% from a year ago. This is twice the annual growth of 3% in average wages.

U.S. median home prices have increased 76% since bottoming out in Q1 2012. Meanwhile, average weekly wages have increased just 17% over the same period.

Average 37% of wages needed for median-value home

Nationwide an average wage earner would need to spend 37% of his or her income to buy a median-priced home in Q3 2018, above the historic average of 34.1%.

The ATTOM Data Solutions U.S. Home Affordability Index analyses median home prices from publicly recorded sales deed data  and average wage data from the U.S. Bureau of Labor Statistics in 440 U.S. counties with a combined population of more than 220 million.

The affordability index is 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% down payment, including property taxes, home insurance and mortgage insurance.

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 with, assuming a 3% down payment and a 28 percent maximum “front-end” debt-to-income ratio.

That required income is higher than the $55,926 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.

Source: https://www.attomdata.com/news/market-trends/home-sales-prices/q3-2018-home-affordability-report/