U.S. home affordability drops to lowest level in 10 years
IRVINE, Calif. – Oct., 4, 2018 – ATTOM Data Solutions' Q3 2018 U.S. Home Affordability Report finds that U.S. home prices were at the least affordable level since Q3 2008 – a 10-year low.
The report's affordability index is based on an area's percentage of income needed to buy a median-priced home relative to historic averages. An index above 100 indicates that median home prices are more affordable than the historic average; an index below 100 indicates that home prices are less affordable than the historic average.
Nationwide, the Q3 2018 home affordability index was 92 – down from an index of 95 in the previous quarter and 102 one year earlier. It's the lowest level since Q3 2008, when the index was 87.
In 78 percent of the 440 U.S. counties analyzed, the index fell below 100, meaning homes were less affordable than the long-term affordability averages for the county.
"Rising mortgage rates have pushed home prices to the least affordable level we've seen in 10 years, both nationally and at the local level," says Daren Blomquist, senior vice president at ATTOM Data Solutions. "Close to one-third of the U.S. population now lives in counties where buying a median-priced home requires at least $100,000."
In Florida, the affordability index varies since counties with high home prices may be more affordable if they also have relatively high median incomes. In St. Johns County, for example, it would take 55.8 percent of average wages to afford a median-priced house, according to ATTOM. On the other hand, it would only take 27.5 percent of an average wage in nearby Duval County to buy a median-priced home there.
ATTOM has a heat map posted on its website that includes study statistics on 36 Florida metro areas.
In 69 of the 440 U.S. counties, prospective homebuyers need to make $100,000 or more to buy a median-priced (16 percent), assuming a 3 percent downpayment and a maximum front-end debt-to-income ratio of 28 percent. This list was led by the five California bay area counties followed by three in the New York City area.
In 86 percent of local markets, home price increases are outpacing average incomes.
Tendayi Kapfidze, chief economist at LendingTree, says that homebuyers today can afford less house than they did one year ago. Thanks to rising interest rates, he estimates that they can afford about 10 percent less home.
"This means at each price point, the number of buyers is falling, reducing demand," Kapfidze says. "This has had immediate effects on the number of houses sold and will over time reduce the pace of home price increases. This is not cause for alarm, however. Home prices have been outpacing incomes since 2012 at a pace that is unsustainable, and a period of consolidation is healthy for the housing market."
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