US Home Affordability Hits 16-Year Low, Report Shows

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ATTOM, a curator of property data, released its U.S. Home Affordability Report for the third quarter of 2023, revealing a concerning trend in housing affordability. The report shows that median-priced single-family homes and condos are now less affordable than historical averages in 99% of counties across the country with sufficient data to analyze.

The worsening affordability issue is a result of a third-quarter increase in home prices and mortgage rates, pushing the typical portion of average wages required for major homeownership expenses up to 35%. This number surpasses the standard lending guideline of a 28% debt-to-income ratio, marking the highest level since 2007.

Rob Barber, CEO for ATTOM, noted that these dynamics appear to be working against everyday Americans and could potentially impact home prices. “With basic homeownership now soaking up more than a third of average pay, the stage is set for potential buyers to be priced out,” Barber remarked.

Despite the ongoing trend of decreasing affordability, the forces driving this scenario remain in flux. Home values have increased at a modest pace in the third quarter, and mortgage rates have started to stabilize. However, the stock market has fallen back after a year of gains, and inflation has ticked upward after a year of declines. These shifting factors could affect home affordability in either direction in the coming months.

In their analysis, ATTOM determined affordability by calculating the income needed to meet major monthly homeownership expenses on a median-priced single-family home. They then compared this required income to annualized average weekly wage data from the Bureau of Labor Statistics.

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Compared to historical levels, median home prices in 574 of the 578 counties analyzed are less affordable than in the past. Major homeownership expenses are considered unaffordable for average local wage earners in 457 of the 578 counties in the report, based on the 28% guideline.

The counties with the largest populations that are unaffordable include Los Angeles County, Cook County (Chicago), Maricopa County (Phoenix), San Diego County, and Orange County. On the other hand, major expenses on median-priced homes are still affordable for average local workers in 121 counties, including Harris County (Houston), Wayne County (Detroit), Philadelphia County, Cuyahoga County (Cleveland), and Allegheny County (Pittsburgh).

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