Photo: Robert Clark
Rising national home prices and lagging wage growth is putting the dream of homeownership out of reach for many would-be American buyers.
Home prices in the first quarter of this year sat at their least affordable level since 2008, according to a report released yesterday by ATTOM Data Solutions, a multi-sourced national property data warehouse.
“Home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates,” Daren Blomquist, senior vice president at ATTOM Data Solutions, says in the digital release.
To measure overall housing affordability, ATTOM created an index based on the percentage of income needed to buy a median-priced home relative to historic averages.
A reading above 100 indicates that median home prices are more affordable than the historic average, and a reading below 100 indicates median home prices are less affordable than the historic average.
Nationwide, the second quarter home affordability index reading of 95 was down from a reading of 102 recorded the previous quarter. The second quarter’s level was down from last year’s reading of 103 and the index’s lowest reading since the third quarter of 2008 — when the index was 86.
Over the last year, the national median home price rose 4.7 percent to $245,000 in the second quarter of this year, remaining above the average weekly wage growth of 3.3 percent. On a quarterly basis, national home prices fell 7.4 percent from the first quarter.
Since the first quarter of 2012, national median home prices have risen 75 percent while at the same time average weekly wages have increased 13 percent.
Annual home price appreciation outpaced wage growth in 64 percent of counties analyzed by ATTOM for the report.
Median home prices were less affordable than historic averages in 59 percent of local markets in the second quarter. Some 75 percent of local markets were not affordable for average wage earners — based on a 3 percent down payment and a maximum front-end debt-to-income ratio of 28 percent.
The average wage earner would need to spend a little over 31 percent of their income to buy a median-priced home in the second quarter — slightly above the historic average of 29.6 percent.
And in some white-hot markets, like Brooklyn, NY, the income required to buy the typical home has skyrocketed. The average wage earner in Brooklyn would need to spend over 123 percent of their income on housing costs.
In addition to rising home prices, homebuyers have had to contend with rising mortgage rates.
“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,” Blomquist says.
Click here to read the entire release.