Home Affordability Gets Even Tougher As Prices, Mortgage Rates Surge

ATTOM, a property information and analysis provider, has released its first-quarter 2022 U.S. homeowner affordability report. It shows that median-priced single-family homes in the United States were less affordable than historical averages in 79% of counties with sufficient data.

This data was higher than the 38% of historically less affordable counties in the first quarter of 2021 to the great point since mid-2008, as home rates rise faster than the wages in many parts of the country.

The report calculated the income required to cover major homeowner expenses on a median-priced single-family home, including property taxes, insurance, and mortgage payments. It assumed a 20% downpayment and a maximum 28% “front-end” debt-to-income ratio. The required income was then compared with the Bureau of Labor Statistics’ annualized average weekly wages.

Rick Sharga, executive vice-president of market intelligence at ATTOM, stated that it is no surprise that prospective home buyers find it more difficult to afford a property today than they did a year ago. While historically low mortgage rates and rising wages have helped offset rising home prices in the past few years,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “As home prices soar and interest rates approach 5 percent on a 30-year fixed-rate loan, more consumers will struggle to find a property that they can afford.”

Compared to historical levels, the median home price in 461 of 586 counties was lower than in the first quarter of 2022. This increased 449 counties from the fourth quarter of 2021 and 224 from the first quarter of 2021. This increase was continued by the 16% rise in the median national home prices year-over-year to a record $320,000, while the average wage rose only 7%.

The median home rate in the U.S. was $66,560, 26.3% less than the average national wage. However, high ownership costs were still within the means of most workers. This was within the 28% limit that common lending standards consider affordable.

The 26.3% average wage required to purchase a median-priced home was the highest since the third quarter of 2008. This increased 24.9% and 21.8% in the fourth quarter of 2021 and the first quarter last year, the most significant annual rise since 2005.

Jim McQuaig is senior vice president at Churchill Mortgage, Washington. “The gig economy exists, growing faster among the under-30 crowd,” he said. Post-pandemic, the independent contractor trend is increasing. This allows for greater flexibility but makes it more challenging to get a mortgage. Although our economy has changed fundamentally in the past 24 months, it’s difficult to predict how this will affect the housing market in the coming years.

As the Covid pandemic, which remained a threat to our economy, continued to threaten the housing market, the affordability situation for potential home buyers worsened.

Record numbers of buyers have sought out homes to buy during the pandemic. The high demand was partly due to mortgage rates hovering at 3% and the flight by urban renters leaving virus-prone areas in search of the safety and security of a house and yard and the possibility of growing a work-at-home lifestyle. Prices have increased beyond what is necessary to meet demand, which has made it more difficult for many people to afford homes.

The report found that high homeownership costs on average homes were still affordable for most local wage earners in the first quarter of 2022, in roughly half of the 586 counties. This is based on the 28% guideline. The largest counties were Chicago’s Cook County and Houston’s Harris County.

Los Angeles County, Maricopa County (Arizona), San Diego County, California’s Orange County, and Kings County in New York were the most populous of the 303 counties where the median home price was too high for local workers.

The median single-family home price in the first quarter of 2022 was at least 10% higher than the first quarter of 2021 in 371 counties, or 63% of the 586 included in this report. The data were inspected for counties with at least 100,000 inhabitants and 50 condo and single-family home sales in the first quarter of 2022.

The most significant year-over-year increases in median prices in the first quarter of 2022 for the 49 counties that have at least one million residents were recorded in St. Louis County in Missouri (up 40%); Wake County in Raleigh, North Carolina (up 29%), Maricopa County in Arizona (up 28%), Collin County in Plano, Texas (up 27%), Clark County in Las Vegas, Nevada (up 26%).

There were four counties with at least one million residents where the median price went up year-over-year during the first quarter of 2022: Westchester County, New York (outside New York City), down less than 1%; Montgomery County, Maryland, (up 1%); Cook County (Chicago), (2%) Kings County (Brooklyn), (4%) and Fairfax County, Virginia, (up 5%)

In 473 of 586 counties, the home price appreciation exceeded weekly wage growth in 2022’s first quarter (81%), the largest being Los Angeles County, Harris County(Houston), Maricopa County(Phoenix), San Diego County (outside Los Angeles), and Orange County (outside Los Angeles).

The average annualized wage growth outpaced home-price appreciation during the first quarter of 2022 in 113 counties, including Cook County (Chicago), Kings County (Brooklyn), King County (Seattle), and Santa Clara County(San Jose), and New York County (“Manhattan”).

High ownership costs for median-priced single-family homes in 2022 were less than 28% of the average local wage in 283 of 586 counties (48%), assuming a 20% downpayment. This was slightly lower than 52% for the same county group in the fourth quarter of 2021, but still a significant decrease from 66% in last year’s first quarter.

Sharga stated that “the good news is that homeownership costs for households with an average income remained below 28% in nearly half of the countries we examined.” The X factor is the impact that an 8% inflation rate could have on these households’ ability to pay their financial obligations and their ability. Rising energy and food prices may be hidden factors that make it harder for homeowners to afford homes and more challenging to keep up with their financial obligations.

98% of the surveyed counties saw an increase in the number of local wages used by high ownership costs from the first quarter last year to this year.

52 percent of the 303 counties included in the report required more than 28% in annualized weekly wages to purchase a home in the first quarter of 2022. Santa Cruz County in California needed 92.7% of the annualized weekly wages to buy a home; Kings County (Brooklyn), 91.5%; Marin County, California (outside San Francisco), 79.7%; Maui County, Hawaii (74.8%), and San Luis Obispo County California (73.7%).

Despite the decline in affordability, it was still necessary to have annual wages exceeding $75,000 to cover high costs for the median-priced home bought in the first quarter of 2022 in just 24% of the 586 markets included.

The 25 top highest annual wages needed to afford homes were found on the East and West Coasts. They included New York County (Manhattan), $329,747, San Mateo County, (outside San Francisco), $286,976 and Santa Clara County, (San Jose, California), $266,934; San Francisco County in California ($264,038), and Marin County (outside San Francisco), $250,106.

In the first quarter of 2022, the lowest annual wages needed to afford a median-priced house were in Schuylkill County in Pennsylvania (outside Allentown), ($12,011), Cambria County in Pennsylvania (outside Pittsburgh), ($17,129), Bibb County in Georgia (18,027), Fayette County in Pennsylvania ($18.583), and Blair County in Altoona, Pennsylvania (19,221).

The Counties in which the lowest amount of local average wages was needed to purchase a median-priced home for the first quarter of the year were Schuylkill County in Pennsylvania (outside Allentown); Macon County (Decatur), Illinois (9.7%); Peoria County (10.2%); Bibb County(Macon), Georgia (10.2%); and Rock Island County (“Moline”), Illinois (11%).

There were at least one million people in all the counties where major ownership costs consumed less than 28% of local wages during the first quarter of 2022. These included Wayne County (Detroit), Michigan (11.9%), Allegheny County(Pittsburgh), (14.2%), Cuyahoga County [Cleveland], Ohio (15.1%), Philadelphia County (16%), and Cook County (20.6%).

52 percent of the 303 counties included in the report required more than 28% in annualized weekly salaries to buy a home in the first quarter 2022. Santa Cruz County in California required 92.7% of the annualized weekly wage needed to purchase a home; Kings County (Brooklyn), New York (91.5%); Marin County (outside San Francisco), 79.7%; Maui County, Hawaii (74.8%), and San Luis Obispo County (73.7%).

Apart from Kings County in New York, California, where homeownership consumes the highest percentage of annualized local wages, Orange County, California (outside Los Angeles), 67.8%; Queens County, New York (65%); Alameda County, California (59%) and New York County, Manhattan, New York 58.9%.

Only one-fourth of counties need annual wages exceeding $75,000 to be able to afford a home. Despite the declining trend in affordability, it was still necessary to have annual wages exceeding $75,000 to cover major costs for the median-priced home bought in the first quarter 2022 in just 24% of the 586 markets included in the report.

The 25 highest average annual wages needed to afford typical homes were found on the East and West Coasts. They included New York County (Manhattan), 329,747, San Mateo County (outside San Francisco), 286,976; Santa Clara County(San Jose), California ($266,934), San Francisco County, California ($264.038), and Marin County (outside San Francisco), California ($250.106).

In the first quarter 2022, the lowest annual wages needed to afford a median-priced house were in Schuylkill County in Pennsylvania (outside Allentown), ($12,011), Cambria County in Pennsylvania (outside Pittsburgh), ($17,129), Bibb County in Georgia (18,027), Fayette County in Pennsylvania (south Pittsburgh), ($18,583), and Blair County (Altoona), Pennsylvania (19,221).

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Robert Scoble
Robert is the assistant managing editor for HC News, overseeing coverage of markets, companies, strategy and business leaders. Originally from Boston, Scoble began his journalism career in 1997 & now resides outside New York.

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