Median-Priced Homes Not Affordable for Average Wage Earners in Several Markets
The second quarter 2019 U.S. Home Affordability Report, released June 25 by ATTOM Data Solutions, shows that median home prices in the second quarter of 2019 were not affordable for average wage earners in 353, or 74%, of 480 U.S. counties analyzed in the report.
The largest populated counties where a median-priced home was not affordable for average wage earners during the report’s time period were Los Angeles County, California; Cook County (Chicago), Illinois; Maricopa County (Phoenix), Arizona; San Diego County, California; and Orange County, California.
The 127 counties (26% of the 480 counties analyzed in the report) where a median-priced home in the second quarter of 2019 was still affordable for average wage earners included Harris County (Houston), Texas; Wayne County (Detroit), Michigan; Philadelphia County, Pennsylvania; Cuyahoga County (Cleveland), Ohio; and Franklin County (Columbus), Ohio.
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 3% down payment 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.
“Despite falling mortgage rates and rising wages, the cost of owning the typical home remains out of reach or a significant financial stretch for the nation’s average wage earners,” said Todd Teta, chief product officer with ATTOM Data Solutions. “However, a closer look at the data reveals milder-than-usual increases for the Spring, and none as severe as in previous years since the recession. Therefore, this can help indicate the market may be easing, following similar indicators from recent home-flipping and foreclosure data trends.”
Home Price Appreciation Outpacing Wage Growth
Home price appreciation outpaced average weekly wage growth in 192, or 40%, of the 480 counties analyzed in the report, including Maricopa County (Phoenix), Arizona; Riverside County, California; San Bernardino County (Riverside), California; Tarrant County (Dallas-Fort Worth), Texas; and Wayne County (Detroit), Michigan.
On the other hand, average weekly wage growth outpaced home price appreciation in 288, or 60%, of the 480 counties analyzed in the report, including Miami County, Florida; Kings County, New York; Dallas County, Texas; Queens County, New York; and Clark County, New York.
Historic Average Comparisons
Among the 480 counties analyzed in the report, 292, or 61%, were less affordable than their historic affordability averages in the second quarter of 2019, up from 50% of counties in the previous quarter but down from 74% of counties in the second quarter of 2018.
Conversely, 188 (39%) of counties were more affordable than their historic affordability averages in the second quarter of 2019, including Cook County (Chicago), Illinois; and the New York metro counties of New York County, Suffolk County, Bronx and Nassau County.
Counties with the highest affordability index were Warren County (Allentown), New Jersey (158); Litchfield (Torrington), Connecticut (139); Cumberland (Vineland), New Jersey (139); Mercer County (Trenton), New Jersey (137); and Atlantic County (Atlantic City), New Jersey (134).
A total of 393 (82%) of the 480 counties analyzed posted a year-over-year increase in the affordability index, meaning that home prices were more affordable than a year ago, including Los Angeles County, California; Cook County (Chicago), Illinois; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; and San Diego County, California.
A total of 87 (18%) of the 480 counties analyzed posted a year-over-year decrease in their affordability index, meaning that home prices were less affordable than a year ago, including Salt Lake County, Utah; Saint Louis County, Missouri; Marion County (Indianapolis), Indiana; Middlesex County, New Jersey; and Jackson County (Kansas City), Missouri.
