Affordable housing options in the U.S. are declining. ATTOM Data Solutions tracked 414 counties across the country and found that 24% of them were less affordable than their historic average in the 3rd quarter of 2016, up from the 22% mark in the 2nd quarter and 19% a year earlier. The 24% share was the highest since the 3rd quarter of 2009, when a staggering 47% of markets fell below their historic affordability averages.
The affordability index is based on the share of average wages (from the U.S. Bureau of Labor Statistics) that is required to make monthly payments on a home at the median price as determined by publicly recorded sales deeds. That payment is made up of principle, interest on a 30-year fixed rate mortgage with a 3% down payment, and includes property taxes and insurance.
The improving affordability trend has reversed course following home price appreciation acceleration and wage stagnation. Nationwide, average weekly wages declined in the 1st quarter of 2016 after 13 consecutive quarters of year-over-year increases, according to Daren Blomquist, senior vice president at ATTOM. As a result 63% of markets saw worsening affordability.
A Silver Lining
There is a silver lining though, as some of the highest-priced markets, generally bastions of low affordability, actually improved in the index, mostly due to annual home price appreciation slowing to single-digit percentages. This is good news for prospective buyers who have been priced out of those expensive markets.
261 counties, or 63% of the field, suffered worsened affordability levels compared to a year ago. 368 counties, or 89%, saw annual growth in median home prices outpace annual growth in weekly wages.
Since the 1st quarter of 2012, when median home prices bottomed out nationwide, they have risen 60% while average weekly wages have only risen 6% over the same timeframe.
Across all 414 counties analyzed, earners must spend 36.3% of their income to buy the median-priced home, still a bit below the historic average of 38.8%, but above the 35.8% mark from a year ago. A few counties that rose well above the national average were Kings County, NY (Brooklyn) at 123.5%, Santa Cruz County, CA at 111.1%, Marin County, CA at 109.4%, New York County, NY (Manhattan) at 96.6%, and San Luis Obispo County, CA at 91.2%.
The ATTOM analysis used closings costs data from ClosingCorp that include title, settlement services, transfer taxes, appraisal, home inspection and recording fees. The report found that average closing costs for 2016 sales were $3,815, an average of 1.8% of the median sales price in each county and 8% of the annual wages in each county.
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