September 20, 2016

Housing Harder for Americans to Afford in Q3

If you feel like home prices are out of control, there’s some data that lends a little credence to your theory. According to a study published at the end of September by ATTOM Data Solutions, housing affordability is rising in many counties across the United States.

ATTOM, RealtyTrac’s new parent company, revealed that almost a quarter of the 414 U.S. counties they track are currently less affordable than their historical average. The Q3 price data shows a year-over-year jump of five percent and a quarter-over-quarter jump of about two percent. The 24 percent of counties showing higher-than-historic-average affordability in Q3 2016 was the highest mark for that metric since 2009.

ATTOM’s report showed 101 out of 414 tracked counties with an affordability index less than 100. A score below 100 means a median-priced property in that county is less affordable than a historical average calculated from data going back to the beginning of 2005.

The affordability index also factors in the percentage of wages required to make house payments on a median-priced property. The theoretical payment includes property taxes, insurance, interest on a 30-year fixed rate mortgage (minus a three percent down payment), and a principle.

Not All Bad News

The report had good news for homebuyers in some counties across the nation. Affordability improved in some of the U.S. housing markets that had previously seen the most price inflation. That’s a good sign that home prices are starting to react accordingly to affordability constraints. For buyers that have been holding back because they felt priced out of a market, this is a positive development that may signal more correction ahead in Q4 and into 2017.

At the County Level

Of course, the overall picture is that homes are getting less affordable. The pricing situation worsened in 261 counties tracked by ATTOM. Median home price growth outpaced wage growth in nearly 90 percent of the 414 counties in the study.

The trend in the two previous quarters of 2016 was the opposite of what took place in Q3. In the second quarter this year, the percentage of counties with higher home price growth than wage growth dropped to a recent low of 58 percent.

One major reason for the worsening of the price and wage gap was the stagnation of income. Looking at the 414 counties in the report, average weekly wages fell by 0.1 percent in the third quarter.

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