ATTOM released its fourth-quarter 2022 U.S. Home Affordability Report showing that median-priced single-family homes and condos are less affordable in the fourth quarter of 2022 compared with historical averages in 99 percent of counties across the nation with enough data to analyze.
Newest figures are far above the 68 percent of counties that were less affordable in the fourth quarter of 2021.
The report further shows that the portion of average wages nationwide required for typical major homeownership expenses has risen to 32.3 percent in the fourth quarter. That’s considered unaffordable by traditional lending standards and up from 29.6 percent in the third quarter of 2022 and from 23.8 in late-2021. It now stands at its highest point since 2007.
ATTOM data shows that affordability has worsened due to rising home-mortgage rates in the U.S., which offset the benefits of rising wages and a recent decline in home values. Higher loan rates in 2022 have pushed up major ownership expenses on median-priced homes by 10 percent in the fourth quarter even as the median price of single-family homes and condos nationwide dipped 3 percent, and following a 4 percent drop over the Summer.
Lower prices and a 1 percent gain in average wages have not made up for the impact of these increased mortgage payments.
“Prospective homebuyers – especially first-time buyers – can’t seem to catch a break,” said Rick Sharga, executive vice president of market intelligence at ATTOM, in a release. “For the past two years, home prices have appreciated in double digits – 15 to 20 percent a year in some markets. Now that home prices have plateaued and even declined in some markets, buyers are faced with mortgage rates that have doubled, making home purchases even less affordable.”
Compared to historical levels, median home prices in 577 of the 581 counties analyzed in the fourth quarter of 2022 are less affordable than in the past. The latest number is up slightly from 572 of the same group of counties in the third quarter of 2022. However, it is well up from 393 in the fourth quarter of 2021 and from just 181, or less than a third, in late-2020.
Meanwhile, major home-ownership expenses on typical homes are unaffordable to average local wage earners during the fourth quarter of 2022 in 427, or about three-quarters, of the 581 counties in the report, based on the 28-percent lending guideline.
Counties with the largest populations that are unaffordable in the fourth quarter are Los Angeles County, Calif.; Maricopa County (Phoenix), Ariz.; San Diego County, Calif.; Orange County, Calif. (outside Los Angeles) and Kings County (Brooklyn), N.Y.
The most populous of the 181 counties where major expenses on median-priced homes remain affordable for average local workers in the fourth quarter were Cook County (Chicago), Ill.; Harris County (Houston), Texas; Wayne County (Detroit), Mich.; Philadelphia County, Pa., and Cuyahoga County (Cleveland), Ohio.
“There is a scenario where affordability improves as we move through 2023,” Sharga added. “Wage growth continues to be strong; home prices appear to have stabilized and are even going down slightly; and mortgage rates may have peaked for this cycle and could go down gradually next year. If those conditions remain in place, the affordability picture is much brighter for a lot of potential buyers.”
Home prices remain up at least 5 percent annually in two-thirds of U.S.
Despite the recent decline in the U.S. housing market, median single-family home and condo prices in the fourth quarter of 2022 remain up by at least 5 percent over the fourth quarter of 2021 in 361, or 63 percent, of the 581 counties included in the report. However, typical values have dropped from the third to the fourth quarter in 463, or 80 percent, of those counties.
That has contributed to a nationwide 3 percent decrease in the median home price, from $335,000 in the third quarter to $325,000 in the fourth quarter. The median is now down 6.9 percent from the peak of $349,000 in the second quarter.
Data was analyzed for counties with a population of at least 100,000 and at least 50 single-family home and condo sales in the fourth quarter of 2022.
Among the 48 counties in the report with a population of at least 1 million, the biggest year-over-year gains in median sales prices during the fourth quarter were in Collin County (Plano), Texas (up 34 percent); Hillsborough County (Tampa), Fla. (up 18 percent); Miami-Dade County, Fla. (up 17 percent); St. Louis County, Mo. (up 16 percent) and Palm Beach County (West Palm Beach), Fla. (up 16 percent).
Counties with a population of at least 1 million where median prices have dropped most, year-over-year, during the fourth quarter were Philadelphia County, Pa. (down 13 percent); New York County (Manhattan), N.Y. (down 4 percent); Honolulu County, Hawaii (down 4 percent); Bronx County, N.Y. (down 1 percent) and Santa Clara County (San Jose), Calif. (down 1 percent).
Annual price gains still outpacing wage growth
Annual home-price appreciation surpassed weekly annualized wage growth in the fourth in 327 of the 581 counties analyzed in the report (56 percent). That was down from 84 percent of counties analyzed in the third quarter. The latest group where price gains outpaced wage gains includes Kings County (Brooklyn), N.Y.; Miami-Dade County, Fla.; Dallas County, Texas; Queens County, N.Y., and Clark County (Las Vegas), Nev.
Average annualized wage growth surpassed year-over-year home-price appreciation in the fourth quarter in 254 of the counties in the report (44 percent). That was up from 16 percent of counties analyzed in the third quarter. The latest group where wages are going up faster than prices included Los Angeles County, Calif.; Cook County, (Chicago), Ill; Harris County (Houston), Texas; Maricopa County (Phoenix), Ariz., and San Diego County, Calif.