Home affordability remains a challenge for average wage earners

Home prices were not affordable for nearly three-quarters of average workers in the nation in the second quarter of 2019, according to a recent report by the real estate data company ATTOM Data Solutions.

In its U.S. Home Affordability Report for the quarter, ATTOM Data Solutions analyzed the affordability of homes in 480 counties. Median home prices in 74 percent of these counties were not affordable for those earning an average wage in the county.

Todd Teta, chief product officer with ATTOM Data Solutions, said affordability challenges persist despite trends of falling mortgage rates and rising wages. However, he said less pronounced home price increases in the spring may signal a shift toward improved affordability.

Sixty-seven percent of the counties in the report required at least 30 percent of an average earner's annualized weekly wages to meet the costs of earning a home. The necessary costs completely exceeded this income in Marin County, Calif. (116.8 percent), Kings County, N.Y. (113.4 percent), and Santa Cruz County, Calif. (112.3 percent).

Bibb County in Georgia required the smallest share of wages to purchase a home, with the average earner able to buy a median-priced home in the market with just 12.9 percent of their pay. Other counties where a modest share of income was necessary to buy a typical home included Wayne County, Mich. (13.2 percent), Baltimore City, Md. (13.6 percent), Rock Island County, Ill., and Allen County, Ohio (both 14.9 percent).

In 40 percent of the counties analyzed for the report, home price appreciation was outpacing wage growth. Markets where this trend was occurring included Maricopa County, Ariz.; Riverside County and San Bernardino County, Calif.; Tarrant County, Texas; and Wayne County, Mich. Notable markets where wages were growing faster than home prices included markets in the metro areas for Dallas, New York City, and Miami.

The affordability in 61 percent of the counties was worse than historic averages, up from 50 percent in the previous quarter but down from 74 percent in the second quarter of 2018. In 82 percent of the counties the affordability index was up from the previous year, meaning home prices were more affordable than in the second quarter of 2018.

In New London County, ATTOM Data Solutions determined that the average worker had annualized weekly wages of $55,276. The report said these workers would need to put one-third of this income toward the purchase of a median-priced home of $216,000. ATTOM Data Solutions concluded that wages in the county were up 1.7 percent from the previous year while the median price for a home was down 3.2 percent.

The report collected annualized average weekly wage data from the Bureau of Labor Statistics. It calculated the cost to purchase a home assuming a 3 percent down payment, a 28 percent maximum debt-to-income ratio, and monthly payments including property taxes and homeowners insurance along with the mortgage.

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