Home affordability is improving in the US but still down compared to a year ago

Home affordability in the United States improved in the third quarter of 2017 in 60% of counties but it is still worse than it was a year ago in 79% of them, new research shows.

Those seeing an improvement include Los Angeles, Cook County in Chicago, Harris County in Houston, Maricopa County in Phoenix, and San Diego but home affordability fell in Wayne County in Detroit, Middlesex County in Boston and Suffolk, Bronx and Westchester in New York.

The national home affordability index from property database ATTOM Data Solutions was 100 in the third quarter of 2017, the lowest national affordability index since the third quarter of 2008, when the index was 86. An index of 100 means the share of average wages needed to buy a median priced home nationwide is on par with historic averages.

‘Falling interest rates in the third quarter provided enough of a cushion to counteract rising home prices in most U.S. markets and provide at least some temporary relief for the home affordability crunch,’ said Daren Blomquist, senior vice president at ATTOM Data Solutions.

‘More sustainable relief for the affordability crunch, however, will need to be some combination of slowing home price appreciation and accelerating wage growth. Wage growth is outpacing home price growth in about half of all local markets so far this year, an indication that a more sustainable affordability pattern is taking shape in more local markets,’ he added.

The research also shows that annual wage growth is outpacing home price growth in 48% of markets, down from 53% in the second quarter of 2017 and down from 50% in the first quarter of the year. It is the first time since the first quarter of 2012 that at least half of all markets saw wage growth outpacing home price growth.

Since bottoming out nationwide in the first quarter of 2012, median home prices have risen 73% while average weekly wages have increased 13% over the same period.

Matthew Gardner, chief economist at Windermere Real Estate in Seattle, one location where homes are considered unaffordable, believes that the short term outlook is not good. ‘Housing starts remain well below the long term average, and we are not seeing the level of resale home sales that one would normally expect. These factors will cause home prices to keep trending higher and, as long as the economy remains strong, demand will continue to exceed supply,’ he said.

Overall home prices are less affordable than historic averages in 45% of markets, down from 49% in the previous quarter but still up from 21% a year ago.

‘Home prices are still increasing in Ohio, primarily due to shortage of inventory coupled with high demand, especially among first time buyers, mainly due to an increase in employment within the state,’ said Matthew Watercutter, senior regional vice president of HER Realtors, covering the Dayton, Columbus and Cincinnati markets.

‘Even though the values are increasing, Ohio remains one of the most affordable states in which to live,’ he added.

Nationwide, buying a median priced home in the third quarter of 2017 required 29.5% of average wages, on par with the historic average of 29.6%. The highest percentage is needed in Kings County in Brooklyn at 125.8%, followed by Marin County in San Francisco at 104.7%, and Santa Cruz County in California at 101.6%.

Buying a median priced home required the lowest percentage of average wages in Clayton County in Atlanta at 12%, Bibb County in Georgia at 12.5%, Wayne County in Detroit at 14.5%, Rock Island County in Illinois at 14.8% and Allen County in Ohio at 15%.