Median home prices of single-family homes and condominiums were less affordable than historical averages in 55% of U.S. counties with enough data to analyze, according to property database curator Attom Data Solutions’ fourth-quarter 2020 U.S. Home Affordability Report. The figure is up from 43% at year-end 2019 and 33% in 2017. Rising wages and falling mortgage rates still helped keep median home prices close to affordable for average wage earners across the country.
“Owning a home in the United States slipped into the unaffordable zone for average workers across the nation in the fourth quarter as the numbers continued a year-long slide in the wrong direction. The latest housing market data shows the average worker unable to meet the 28% affordability guideline used by lenders,” said Todd Teta, chief product officer with Attom Data Solutions. “That’s happened as home prices have continued rising throughout 2020 and the housing market has remained remarkably resilient in the face of the brutal economic fallout from the coronavirus pandemic. The future remains wholly uncertain and affordability could swing back into positive territory. But for now, things are going in the wrong direction for buyers.”
The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments (including mortgage, property taxes and insurance) on a median-priced home, assuming a $100,000 loan 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.
Compared to historical levels, 275 of the 499 counties analyzed in the fourth quarter of 2020, or 55%, were less affordable than past averages, up from 217 of the same group of counties in the fourth quarter of 2019 and 164 in the fourth quarter of 2017. The fallback came as continued spikes in median home prices of at least 10% over the past year in most of the country outpaced the impact of increasing wages and declining mortgage rates to historic lows. Those price increases occurred as the U.S. housing market kept booming despite economic troubles related to the ongoing COVID-19 pandemic.
With prices rising faster than earnings, major home-ownership expenses consumed 29.6% of the average wage across the nation during the fourth quarter of 2020. That figure was up from 26.4% in the fourth quarter of 2019 and was above the 28% benchmark lenders prefer for how much homeowners should spend. Those costs exceeded the benchmark in 59% of the counties included in the report.
The most populous of the 296 counties with unaffordable major expenses on median-priced homes for average earners in the fourth quarter of 2020 (53% of the counties analyzed) were Los Angeles County, California; Maricopa County (Phoenix), Arizona; San Diego County, California; Orange County, (outside Los Angeles), California and Miami-Dade County, Florida.
