Photo: Mike Sinko/Flickr
Even as national home affordability slid to a 10-year low at the year’s end, many markets saw price appreciation slow down to be more in line with local wage growth, according to a new report from ATTOM Data Solutions, curator of the country’s largest property database.
“We saw slowing home price appreciation in nearly half of all local markets in our Q3 2018 home sales report, and expect that to continue into 2019, which will push more markets into the category of wage growth outpacing home price growth,” Daren Blomquist, ATTOM senior vice president, tells Livabl.
At the national level, ATTOM’s home affordability index fell to a reading of 91 in the fourth quarter of 2018 — the lowest level since the third quarter of 2008 when the index was 87. The index was at 94 in the previous quarter, and read 106 at this time last year.
ATTOM calculates its affordability 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 an index below 100 indicates that median home prices are less affordable than the historic average.
Among the 469 counties analyzed, some 76 percent posted an affordability index below 100 in the fourth quarter of 2018, indicating that homes were less affordable than the long-term affordability averages for the county.
This was down from a 10-year high of 78 percent of counties posting an affordability index below 100 in the the previous quarter.
But bucking the national trend, affordability improved from the previous quarter in 58 percent of the counties analyzed, including Cook County (Chicago), Harris County (Houston), San Diego County, and Miami-Dade County, Florida.
“These markets are leading the trend that I believe other markets will fall in line with next year,” says Blomquist.
In the markets where affordability has improved, ATTOM reports either a significant slowdown in the rate of home price appreciation or stronger wage growth..
As the year ends, the national median home sales price is $241,250, up 9 percent from a year ago. And the national median salary has grown to $56,381, up 3 percent from a year ago at this time.
While annual home price appreciation outpaced annual average wage growth in most markets in the fourth quarter of 2018, annual average wage growth outpaced annual home price appreciation in 22 percent of markets.
These included some of the country’s hottest markets — Brooklyn and Manhattan (New York City), Seattle, WA, and San Jose, CA.
Nationwide, buying a median-priced home would require 35 percent of an average wage earner’s income at the end of the fourth quarter of 2018, slightly above the historical average of 32 percent.
The counties that had the highest share of wages needed to buy a median-priced home included Kings County (Brooklyn), NY (128.8 percent) and Marin County (San Francisco), CA (124.1 percent).
Looking ahead, Blomquist thinks 2019 will be one of the best years to buy in quite some time.
“There should be more inventory to pick from and fewer multiple offer situations, giving buyers a better chance of actually landing a home at a price they can afford,” says Blomquist.
And rising interest rates should chill the market somewhat, easing competition.
“Rising rates will continue to put downward pressure on demand, both in terms of actual affordability constraints and in terms of the impact it will have on the psychology of buyers and sellers,” says Blomquist.