Housing still unaffordable to average earners in 71% of US – report

by Ryan Smith19 Dec 2019

Median home prices in the fourth quarter were unaffordable for average wage earners in most of the US, according to a new report by ATTOM Data Solutions.

According to the analytics company’s fourth-quarter 2019 U.S. Home Affordability Report, median home prices in QA4 were unaffordable for average wage earners in 344 out of 486, or 71%, of counties analyzed. There was a small improvement in affordability in Q4 – the figure was down from 73% in Q3 and 75% in Q4 of 2018.

The ATTOM report determined affordability for average wage earners by determining the amount of income needed to make monthly house payments – including mortgage, property taxes and insurance – on a median-priced home. The analysis assumed a 3% down payment and a 28% maximum front-end debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.

“Home prices rose across the country by 9% year over year in the fourth quarter of 2019, and the typical home remained a financial stretch for average wage earners,” said Todd Teta, chief product officer at ATTOM Data Solutions. “However, homes were actually a bit more affordable because of declining mortgage rates combined with rising pay to overcome the continued price run-up. As long as people are earning more money and shelling out less to pay off home loans, the market should remain strong with prices continuing to rise, at least in the near term. Those are big ifs, but for now this report offers some decent findings for both home seekers and home sellers.”

While Teta expressed confidence in the housing market’s strength, the news wasn’t particularly good for average wage earners looking to buy a house. Home-price appreciation outpaced wage growth in 76% of housing markets in Q4, and in two-thirds of housing markets, average wage earners would need at least 30% of their wages to buy a home.