Home affordability drops for average workers across U.S.

Home affordability

The latest pattern has resulted in major ownership costs on the typical home consuming 24.9% of the average national wage of $64,857 in Q3 of this year

Curator of the US’s premier property database, ATTOM, today released its Q3 2021 U.S. Home Affordability Report, showing that median-priced single-family homes are less affordable in Q3 compared to historical averages in 75% of counties across the nation with enough data to analyze. That is up from 56% of counties in Q3 2020, to the highest point in 13 years, as home prices have increased faster than wages in much of the country.

The report determined affordability for average wage earners by calculating the amount of income needed to meet monthly home ownership expenses, including mortgage, property taxes and insurance, on a median-priced single-family home, assuming a 20% 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.

Compared to historical levels, median home prices in 430 of the 572 counties analyzed in Q3 2021 are less affordable than past averages. The latest number is up from 317 of the same group of counties in Q3 2020, a downturn that developed as the median national home price rose 18% to a record high of $315,500.

While major ownership costs on median-priced homes do remain within the financial means of average workers across the nation in Q3 2021, the percentage of counties where affordability is worse than historical averages has hit its highest point since Q3 2008.

The latest pattern has resulted in major ownership costs on the typical home consuming 24.9% of the average national wage of $64,857 in Q3 of this year. That is up from 24.3% in Q2 2021 and 22.3% in Q3 of last year. Still, the latest level is within the 28% standard lenders prefer for how much homeowners should spend on mortgage payments, home insurance and property taxes.

Those mixed patterns in Q3 have followed similar trends from earlier in 2021 as the U.S. housing market continues booming despite damage to large segments of the U.S. economy caused by the pandemic that struck in early 2020.

The typical median-priced home around the U.S. remains affordable to workers earning an average wage, despite prices that keep going through the roof. Super-low interests and rising pay continue to be the main reasons, said Todd Teta, chief product officer with ATTOM.

But affordability keeps inching in the wrong direction as the housing market boom keeps roaring ahead. That’s pushing average workers closer and closer to the point where lenders might be reluctant to give them a mortgage, he said. With much still uncertain about how the pandemic and many other forces could still affect the economy, affordability remains a crucial measure of market stability that could easily keep going in the same direction or swing back the other way.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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