As the price tags for homes and mortgage rates climb, the housing affordability crisis has reached levels not seen in more than a decade, according to ATTOM’s first-quarter 2022 U.S. Home Affordability Report.
The April 7 report showed that the average price for single-family homes was less affordable in 79% of counties nationwide in the first three months of the year. Not only is that a steep climb from 38% of counties during the same period last year, but it also marks the highest point since mid-2008.
Key findings:
- Home prices were up at least 10% annually in two-thirds of the country.
- Price gains outpaced wage growth in 81% of markets—four of every five.
- Ownership costs still require less than 28% of average local wages in almost half of the nation (48%)—down from 52% in Q4 of 2021.
- Just one in four counties require annual wages of more than $75,000 to afford a typical home.
- Homeownership is less affordable than historical averages in almost 79% of counties—up from 77% in Q4 2021.
- Among the 586 counties in the report, only 125 (21%) were more affordable than their historic affordability averages in the first quarter of 2022.
What this means:
Frenzied buyer activity throughout the pandemic as consumers chased a historically limited supply of homes for sale has been a consistent strain on the affordability scenario in the housing market.
Affordability was determined by calculating the average earner’s income to meet major monthly homeownership expenses—including mortgage, property taxes, and insurance—on a median-priced single-family home. That assumed they made a 20% down payment and a 28% maximum “front-end” debt-to-income ratio.
As demand has spiked in the housing market, wage growth has continued to lag behind price appreciation for homes, which jumped by 16% year-over-year to a record high of $320,000.
The median home prices in most markets that ATTOM analyzed in early 2022 were less affordable.
“It’s certainly no surprise that affordability is more challenging today for prospective homebuyers than a year ago,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Historically-low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach 5% on a 30-year fixed-rate loan, more consumers are going to struggle to find a property they can comfortably afford.”
Major ownership costs on median-priced homes around the U.S. remained within the financial means of average U.S. workers in the first quarter of 2022, consuming 26.3% of the $66,560 average national wage.
The 26.3% of average wages needed to buy a median-price home stood at the highest point since the third quarter of 2008.
That’s up from 24.9% in the fourth quarter of 2021 and 21.8% in the first quarter of last year, marking the largest annual increase since at least 2005.
“The good news is that in almost half the counties we reviewed, homeownership costs remained below 28% for households with average income,” Sharga said. “But the ‘x-factor’ is what impact 8% inflation rates will have on these households and their ability to meet their financial obligations. Rising food and energy prices could be a hidden factor that makes affordability even more of a challenge for homebuyers and makes it more difficult to make ends meet for current homeowners.”
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news to jgrice@rismedia.com.
