Affordability continued to worsen nationwide despite rising wages and low mortgage rates, according to the fourth quarter 2020 U.S. Home Affordability Report from Attom Data Solutions.
Median home prices during the fourth quarter were less affordable than historical averages in 55% (275 of 499) of the counties analyzed by Attom. That’s up from 43% (217 counties) in 2019 and 33% (164) a year ago, continuing a troubling trend that left homeownership unaffordable for the average American, said Todd Teta, Attom’s chief product officer.
“Owning a home in the United States slipped into the unaffordable zone for average workers across the nation in the fourth quarter as the numbers continued a year-long slide in the wrong direction,” Teta said. “The latest housing market data shows the average worker unable to meet the 28% affordability guideline used by lenders.
“That’s happened as home prices have continued rising throughout 2020 and the housing market has remained remarkably resilient in the face of the brutal economic fallout from the coronavirus pandemic.”
The 28% threshold Teta referenced is the share of the average wage taken up by major homeownership expenses: mortgage payments, insurance and property taxes. Such expenses took up 29.6% of the average wage across the nation during Q4, up from 26.4% in the same quarter in 2019 and eclipsing the 28% watermark.
Broken down geographically, such costs exceeded the preferred threshold in 59% of the counties analyzed by Attom. Those counties included those containing or including several of the country’s major cities, including Los Angeles, Phoenix, San Diego and Miami.
And as Teta mentioned, the decrease in affordability came via an ongoing upsurge in median home prices of at least 10% over the past year in most of the country, more than offsetting the aforementioned growth in wages and drops in mortgage rates. Annual median price growth in the fourth quarter met or exceeded 10% in 79% of counties analyzed by Attom, and price appreciation outpaced average weekly wage growth in a whopping 92%.
Annual wages of over $75,000 were required to afford the typical home in 25% of the markets in the report, including Manhattan and several markets in and around the Bay Area, including San Mateo, San Francisco and San Jose.
Short-term trends point to more price growth, so market observes can expect more of the same, said Teta.
“The future remains wholly uncertain and affordability could swing back into positive territory,” he said. “But for now, things are going in the wrong direction for buyers.”
Some areas of the country were easily more forgiving to buyers than others. The lowest annual wages required to afford a median-priced home in 2020’s fourth quarter were in Macon, Georgia, where a worker needed a wage of just $19,188 per year. Other affordable areas included St. Lawrence County, New York; Trumbull and Allen Counties in Ohio; and Calhoun County, Alabama. And while prices in expensive areas stayed elevated, a few of those markets did see affordability improve compared to their historic averages, including Manhattan; Seattle; Middlesex County (outside Boston), Massachusetts; and Fairfax County, Virginia (outside Washington, D.C.).