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Homeownership Affordability in Q3

Homeownership became less affordable for average wage earners during the third quarter, according to the latest U.S. Home Affordability Report published by ATTOM Data Solutions.

The report benchmarks affordability for average wage earners by calculating the amount of income needed to make monthly house payments on a median-priced home, assuming a 20% down payment and a 28% maximum “front-end” debt-to-income ratio; these costs also include property taxes and insurance in addition to mortgage payments. As a result, ATTOM determined the third quarter median home prices of single-family homes and condos were less affordable in 308 of the 487 counties analyzed for the report, up from 262 counties one year earlier.

ATTOM also observed that an annual wage of more than $75,000 was needed in the third quarter to afford the typical home in 114, or 23%, of the 487 markets in the report. The largest counties where the median home price was not affordable for average wage earners in the third quarter, based on the 28% benchmark, included California’s Los Angeles, San Diego and Orange Counties, Arizona’s Maricopa County and Florida’s Miami-Dade County.

Complicating matters was the spike in median home prices in 252, or 52%, of the 487 counties included in the report, a 10% increase from one year ago. The biggest year-over-year gains in median prices during the third quarter among the major population centers were found in Pennsylvania’s Philadelphia County (up 20%), Ohio’s Franklin County (up 16%) and California’s Contra Costa County (up 15%).

“In a year when nothing is normal, owning a single-family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the opposite way,” said Todd Teta, Chief Product Officer with ATTOM Data Solutions. “Wage are up and mortgage rates are down to rock-bottom levels, which should work in favor of home buyers. On top of that, the American economy has suffered greatly since the coronavirus pandemic began surging over the winter–a plight that normally would drop home demand and home prices.”

Teta added that low mortgage rates helped contribute to a new wave of buyers “chasing a reduced supply of homes. The result is price hikes have raced past the impact of wages and mortgage rates.”

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.
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