U.S. home prices in the third quarter were at the least affordable level since the third quarter of 2008, according to ATTOM Data Solutions’ Q3 2018 U.S. Home Affordability Report.
According to the report, the home affordability index for the third quarter was 92, down from an index of 95 in the previous quarter and an index of 102 in Q3 2017. That is the lowest level since the third quarter of 2008, when the index was 87.
Nearly 80 percent of the counties analyzed in the report had a third-quarter index below 100, meaning homes were less affordable than the long-term affordability averages for that county.
“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,” ATTOM Senior Vice President Daren Blomquist said in a release. “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.
“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,” Blomquist added.
Counties in which prospective homebuyers would need to make $100,000 or more to buy a median-priced home in the third quarter included the California counties of San Mateo ($377,210 annual income needed to buy a median-priced home); San Francisco ($366,582); Santa Clara ($327,284); Marin ($311,827); and Alameda ($237,760). Following those were Westchester County ($228,937); and Kings County ($221,993) in New York.
“As most buyers budget based on monthly payments, the median buyer is now able to bid significantly less than before,” LendingTree Chief Economist Tendayi Kapfidze said. “This means at each price point the number of buyers is falling, reducing demand.
“This has had immediate effects on the number of houses sold and will, over time, reduce the pace of home price increases,” Kapfidze said. “This is not cause for alarm, however. Home prices have been outpacing incomes since 2012 at a pace that is unsustainable, and a period of consolidation is healthy for the housing market.”