As the affordability crisis in the housing market continues to wreak havoc on aspiring buyers, new data from ATTOM Data Solutions shows how far out of reach it has gotten this year.
In its third quarter 2022 U.S. Home Affordability report, researchers found that median-priced single-family homes and condos remain less affordable in the third quarter of 2022 compared to historical averages in 99% of counties nationwide with enough data to analyze.
That measure far exceeds the 69% of counties that were historically less affordable during the same period last year. At the same time, the quarterly figure is above the 28% ceiling lenders generally like to see when issuing a mortgage.
According to the report, the Q3 2022 performance marks “another high point” of the 11-year housing market boom in the U.S.
Despite seeing another quarterly drop in housing affordability, the report also contained a potential silver lining for buyers looking for some relief. It showed that the portion of wages needed for homeownership expenses dipped to 30% in Q3—down from 30.9% in the second quarter.
This is primarily due to the median price decline for single-family homes in the U.S., which fell in the third quarter. The latest median value of $340,000 is down 3% from the second quarter of 2022—the first spring-to-summer decline since 2008.
The report determined affordability for average wage earners by calculating the income needed to meet major monthly homeownership expenses on a median-priced single-family home, assuming a 20% 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.
Key Highlights
- Major homeownership costs require 30% of the average national wage in the third quarter of 2022.
- The portion of wages needed for homeownership dipped to $340,000 as home prices decreased quarterly.
- Home prices are still up at least 10% annually in 302 of the 581 counties (52%) included in the report.
- Typical values have dropped from the second to the third quarter in 230 (40%) counties.
- YoY price gains continue to outpace wage growth in more than 80% of markets.
- The annual home-price appreciation and wage growth gap were most pronounced in Los Angeles County, California; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; San Diego County, California, and Orange County, California (outside Los Angeles).
- The portion of wages needed for homeownership is declining but still exceeds 28% in two-thirds of the nation.
- The portion of average local wages consumed by major ownership costs on median-priced, single-family homes decreased quarterly in 45% of analyzed counties.
- Historic affordability climbed in Q3 but remained worse than historical averages in nearly all (99%) counties.
The takeaway:
“Homeownership remains largely unaffordable for the majority of homebuyers in the majority of markets across the country,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While home prices have declined a bit quarter-over-quarter, they’re still higher than they were a year ago, and interest rates have essentially doubled. Many prospective homebuyers simply can’t afford the home they hoped to buy, and in many cases, no longer qualify for the mortgage they’d need.
“Home price appreciation has slowed dramatically in most markets—and there are even price corrections in some areas—as home sales have declined significantly over the past few months,” Sharga added. “But mortgage rates have risen more rapidly and dramatically than they have in several decades. As a result, a monthly mortgage payment today is 35% to 45% higher than a year ago, making affordability too much of a challenge for many would-be buyers.”
