Home affordability improves for average wage earners to best level in over two years

Attom Data Solutions, curator of the nation’s premier proper ty database and first proper ty data provider of Data-as-aSer vice (DaaS), on Thursday released its first-quar ter 2020 U.S. Home Af fordability Repor t, which shows that median home prices in the first quar ter are unaf fordable for average wage earners in 319 of 483, or 66%, of the U.S. counties analyzed in the repor t.

But that figure is down from 70.4% in the four th quar ter of 2019 and 69.8% from the first quar ter of 2019.

The repor t also shows that owning a median-priced home in the first quar ter of 2020 in the United States — costing $252,500 — consumes 31.1% of the national average wage. That percentage is down from 31.4% in the four th quar ter of 2019 and 31.6% in the first quar ter of 2019, to the lowest percentage since the four th quar ter of 2017, when the average workers were spending 30.8% of wages to own a home.

The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments — including mor tgage, proper ty 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.

“Home af fordability has inched ahead this year across the United States as buying a house or a condo gets closer and closer to the level where the average wage earner can swing the deal within standard lending guidelines,” said Todd Teta, chief product of ficer with Attom Data Solutions. “While the national median price still remains a bit out of reach for the average wage earner, the affordability gap has narrowed to the smallest point in more than two years.

“It seems bizarre that median home prices have risen 8% over the past 12 years while average wages grew by less than half that amount. But falling interest rates continue making up the dif ference, dropping monthly home ownership payments in a majority of the countr y.

“All that may change in a huge way over the next few months as the impact of the coronavirus hits the housing market. We are entering a period of great uncer tainty. But in the initial months of the year, the picture has appeared to continue to brighten for home seekers.”

The most populous counties where a median-priced home in the first quar ter of 2020 was not af fordable for average wage earners include Los Angeles County, Maricopa County (Phoenix), San Diego County, Orange County and Miami-Dade County. The repor t analyzed 483 counties with a population of at least 100,000 and at least 100 homes sales in the first quar ter of 2020.

The 164 counties (34%) where a medianpriced home in the first quar ter of 2020 is affordable for average wage earners include Cook County (Chicago), Harris County (Houston), Dallas County, Wayne County (Detroit) and Philadelphia County.

Annual home price appreciation is outpacing average weekly wage growth in the first quar ter in 309 of the 483 counties analyzed in the repor t (64%), with the largest counties including Los Angeles, Maricopa, San Diego, Orange and Miami-Dade.

Average annualized wage growth is outpacing home price appreciation in 174 of the 483 counties (36%), including Cook, Harris, Queens County (N.Y.), King County (Seattle) and Tarrant County (Fort Worth).

Among the 483 counties analyzed in the report, 288 (59.6%) currently require at least 30% of their annualized weekly wages to buy a home. Those counties that require the greatest percent of wages include Kings County (Brooklyn) (108.1% of annualized weekly wages needed to buy a home); Santa Cruz County (in the San

Jose metro area) (92.8%), Marin County

(in the San Francisco metro area) (91.5%); Maui County, Hawaii (88.5%) and Monterey County (in the San Francisco metro area) (86.8%).

A total of 195 counties in the repor t (40.4%) require less than 30% of their annualized weekly wages to buy a home.