Home Affordability Growing

The median prices of single-family homes and condos in the second quarter of the year are more within financial reach than historical averages in 49% of U.S. counties with enough data to analyze—up from 31% a year ago, according to ATTOM Data Solutions.

The report ascertained affordability for average wage earners through the calculation of how much income would meet monthly home payments on a median-priced home, including mortgage, property taxes, and insurance. That assumes a down payment of 3%, topping out at 28% “front end” debt-to-income ratio. From there, that required income was contrasted against the Bureau of Labor Statistics.

Stacked up against historic levels, 200 of the 406 counties studied in the second quarter today are more affordable—a jump from 126 of the same group of communities in the second quarter of last year. The gains have come on the heels of escalated wages and less expensive mortgage costs stemming from dropping interest rates. Those factors are outweighing persistent price hikes that, in the current quarter, typically surpassed 5%.

In the second quarter of 2020, the lowest annual wages are needed to afford a median-priced home in Macon County (Decatur), Illinois ($19,572); Montgomery County, Alabama, ($25,726); Trumbull County (outside Youngstown), Ohio ($26,444); Rock Island County, Illinois ($27,856); and Sumter County, South Carolina ($28,864).

That said, significant costs on median-priced homes continue to be out of the reach of average wage earners in 74% of counties in the second quarter of this year’s analysis, the climate of improved purchasing conditions notwithstanding. From county to county, major costs of homeownership would eat up more than 28% of average wages.

“The latest affordability numbers reveal a win-win situation for sellers as well as buyers,” said Todd Teta, Chief Product Officer with ATTOM Data Solutions.

Once again, concerns that the economic impact of COVID-19 would paralyze the nine-year escalation in home values are being brushed aside and prices are parachuting around the country during the current home-buying season, continued Teta. A cocktail of wage gains and falling mortgage rates are playing a role in overriding the spikes, culminating in greater home affordability in large swaths of the United States, he said.

“Virus pandemic concerns are still quite valid and may show up in the coming months, which could hurt prices as well as affordability. That remains a significant potential cloud hanging over the market,” he added.

Once COVID-19 became a market factor, new listings for homes with high price tags collapsed faster, according to analysis from Zillow. Affordable listings didn’t feel the brunt as much.

Among expensive homes, which make up the top-fifth of the market, by April, listings spiraled 51.4% year-over-year. Meantime, listings for most-affordable homes, where inventory’s typically the highest, dropped 32.1% annually.

Nevertheless, overall, there has been a rebound in the share of new for sale-listings. They ballooned 5.9% from the prior week. After dropping for the balance of March, among the higher-priced homes, new home listings spiked 8%.

"Many sellers with the flexibility to delay or temporarily remove listings have opted to do so, perhaps waiting out the uncertainty,” said Skylar Olsen, Senior Principal Economist at Zillow. Now that more buyers are in the market, those sellers are wading back in, joining those who had remained motivated to sell for any number of life reasons and adapted with virtual tools and social distancing, added Olsen, "We have not yet seen prices affected, though we expect them to fall modestly on a national level as the pandemic plays out."