ATTOM Data Solutions, curator of the nation’s largest fused property database, released its Q1 2017 U.S. Home Affordability Index, which shows that one in every four county housing markets analyzed for the report were less affordable than their historic affordability averages in the first quarter of 2017, according to the report.
A total of 95 counties out of 379 counties analyzed for the report (25 percent) posted an affordability index below 100 in Q1 2017 — the highest share of markets below the normal affordability index of 100 since Q4 2009. An affordability index below 100 means that the share of averages wages needed to buy a median-priced home is above the historic average for a given market.
The U.S. Affordability Index dropped to an 8-Year low despite annual wage growth outpacing home price growth in 53 of the local markets. Nationally the affordability index in the first quarter of 2017 was 103, down from 108 in the previous quarter and down from 119 a year ago to the lowest level since Q4 2008 — a more than eight-year low. The index of 103 translates to 33.6 percent of average weekly wages needed to buy a median-priced home nationwide, below the historic average of 34.6 percent but the highest share of wages needed since Q4 2008, the report said.
“Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates,” ATTOM Data Solutions’ Vice President Daren Blomquist said in his report. “Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”
Average wage earners would need to spend more than 43 percent of their income — the maximum debt-to-income ratio allowed for a “qualified mortgage” under guidelines from the Consumer Financial Protection Bureau (CFPB) — to buy a median-priced home in 97 of the 379 counties (26 percent) analyzed for the report.
Markets above the 43 percent threshold included Los Angeles, San Diego, Orange, Riverside and San Bernardino counties in Southern California; Kings (Brooklyn), Queens, New York (Manhattan) and Bronx counties in New York City; King and Snohomish counties in the Seattle metro area; Santa Clara, Alameda, Contra Costa, San Francisco, San Mateo and Marin counties in the Bay Area of Northern California; and nine counties in the Washington, D.C. metro area.
“Many homebuyers have been priced out of the Seattle housing market, forcing them to buy in other counties and commute,” Windermere Real Estate Chief Economist Matthew Gardner (Seattle market) said. “The data also shows that the affordability level in King County has eroded to levels we haven’t seen since 2010. Moreover, I believe that it will get worse before it gets better thanks to our growing population, inadequate infrastructure, and land constraints, which are all driving up home prices in and around the Seattle area.”