Americans’ ability to afford a home is at its lowest since the early days of the last recession, according to new data released this week.
The U.S. Home Affordability Report from ATTOM Data Solutions, which tracks the percentage of income needed to buy a median-priced home relative to historic averages, showed the affordability of homes in the second quarter of this year was at its lowest since the autumn of 2008.
Home prices continued to rise this spring, but the cost of borrowing also rose, fairly dramatically, making it harder, financially, to buy a home than in any time on the last decade, ATTOM said.
“Slowing home price appreciation in the second quarter was not enough to counteract an 11 percent increase in mortgage rates compared to a year ago, resulting in the worst home affordability we’ve seen in nearly 10 years,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Meanwhile home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates.”
The nation’s median home price of $245,000 in the second quarter was up 4.7 percent from a year, down from 7.4 percent appreciation in the first quarter but still above the average weekly wage growth of 3.3 percent, the company said.
Since bottoming out in the first quarter of 2012, median home prices nationwide have increased 75 percent while average weekly wages have increased 13 percent during the same period.
Among the metro areas where median home price growth has outpaced growth in wages are Los Angeles, San Diego, Miami and Phoenix.
Not surprisingly, affordability is particularly low in the San Francisco Bay area, and also in Brooklyn, N.Y. In some places in the Bay area, average wage earners would need to spend 133 percent of their income to buy a median-priced home. In Brooklyn, the median home price would also be more than 100 percent of an average wage earner’s income.
Nationwide, an average wage earner would need to spend 31.2 percent of their income to purchase a median-priced house.
An average wage earner wouldn’t be able to buy a median-priced home in about 75 percent of local markets, the researchers found. In addition to California cities, average homes are also out of reach to average wage earners in parts of the Chicago area and in Phoenix.
In a few places, the average wage earner can get a bargain – though the downside is it is mostly because housing prices have stagnated, so current homeowners aren’t so happy about it. People making the local average income in Detroit would only need to spend about 13.5 percent of their income for a home. Clayton County, Ga., and Augusta, Ga. are also affordable based on local wages.
ATTOM calculates affordability for average wage earners by figuring the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance — on a median-priced home with a 3 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio.