Despite wage growth outpacing home price growth, in 25 percent of counties throughout the U.S homes were less affordable than normal during the first quarter of 2017, according to ATTOM Data Solutions’ Home Affordability Index.
ATTOM’s Index found that 95 counties out of 379 analyzed for the report posted an affordability index below 100 for the first quarter of 2017. A score below 100 indicates homes are less-affordable than normal, considering the share of wages needed to buy a median-priced home.
Nationally, however, homes were more-affordable than usual in most counties. The nationwide affordability index for 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 the fourth quarter of 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,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in a press release.
“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,” Blomquist added.
In 97 of the counties analyzed by the index, average wage earners needed 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 — to buy a median-priced home during the first quarter.
Those markets included Los Angeles, San Diego, Orange, Riverside and San Bernardino counties in Calif.; Kings (Brooklyn), Queens, New York (Manhattan) and Bronx counties in New York City; King and Snohomish counties in the Seattle area; Santa Clara, Alameda, Contra Costa, San Francisco, San Mateo and Marin counties in 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,” Windermere Real Estate Chief Economist Matthew Gardner said.
“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.”
The index found five counties where buying a home would require more than 100 percent of average wages. Those counties were Kings County (Brooklyn); Santa Cruz County, Calif.; Marin County, Calif.; New York County (Manhattan); and Maui County, Hawaii.
The index also found wage growth outpaced home price growth in 53 percent of the counties during the first quarter of 2017 -- the highest percentage of counties with wage growth outpacing home price growth since 2012.
“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,” HER Realtors Senior Regional Vice President Matthew Watercutter said.
“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.”