The housing affordability crisis is a mounting challenge that isn’t going away overnight. This, according to a recent report from ATTOM Data Solutions, is evident as factors like rising mortgage rates have exacerbated the challenge to record-level proportions. The organization released its second quarter 2022 U.S. Home Affordability Report on June 30. The report found that median-priced single-family homes and condos were less affordable in the second quarter of 2022 compared to historical averages in 97% of counties across the nation with enough data to analyze—up from 69% during the same period last year.
The report determined affordability for average wage earners by calculating the income needed to meet major monthly homeownership expenses, including mortgage, property taxes and insurance, on a median-priced single-family home.
The report also shows that significant homeownership expenses are now consuming 31.5% of people’s monthly wages as the median price of a single-family home has hit a new high of $349,000, and 30-year mortgage rates have shot up above 5%.
This marks the highest point since the second quarter of 2007, up from 26% in the first quarter of 2022 and 23.9% in the second quarter of last year.
Significant expenses on median-priced single-family homes and condos around the U.S. now require more than 28% of the average $67,587 wage in the U.S.
According to experts, both increases mark the largest jumps since at least 2000.
Key highlights
- Homeownership is less affordable than historic averages in 97% of counties—up from 80% in Q1 2022.
- Median single-family home and condo prices are up at least 10% annually in two-thirds of the country.
- Price gains outpace wage growth in nearly 90% of markets.
- Four in 10 counties require annual wages of more than $75,000 to afford a typical home.
- Historic affordability nationwide has declined for the sixth quarter in a row to the worst level since the second quarter of 2007 near the end of the last housing-market boom.
- Only 3% of markets are more affordable than the historic average.
The takeaway
Despite coming off a roaring housing market in recent years, aspiring and current homeowners have been mired in a growing affordability gap as the cost of owning a home has surged.
A major force remains home prices, which have continued to soar in 2022 with the upward pressure of persisting supply and demand imbalances. Climbing mortgage rates and continued economic headwinds have compounded the issue for buyers, according to ATTOM experts.
“Extraordinarily low levels of homes for sale combined with strong demand have caused home prices to soar over the last few years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “But homes remained relatively affordable due to historically low mortgage rates and rising wages. With interest rates almost doubling, homebuyers are faced with monthly mortgage payments that are between 40% and 50% higher than they were a year ago—payments that many prospective buyers simply can’t afford.
“Worsening affordability appears to be having an impact on demand, which could lead to prices plateauing or even correcting modestly in some markets. Many potential buyers may elect to continue renting until market conditions improve. Others might adjust their sights and look for smaller properties or homes that are further away from major metro areas. And it’s possible that worsening affordability could accelerate the migratory trends that the COVID-19 pandemic started, as residents in high-cost, high-tax states who can now work from home look for less expensive places to live,” added Sharga.
