Median-priced single-family homes and condos were less affordable compared with historical averages in 99% of U.S. counties in the third quarter, according to ATTOM. The third quarter 2023 U.S. Home Affordability Report illustrates worsening affordability conditions amid increases in home prices and mortgage rates.
According to ATTOM, the typical portion of average wages now required for major homeownership expenses is 35%, which is considered “unaffordable” by common lending standards. The 35% share of wages is the highest level since 2007 and is “well above” the 21% share from early 2021, according to ATTOM.
“The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices,” says Rob Barber, CEO of ATTOM. “We clearly aren’t there yet, as the market keeps going up and the slowdown we saw last year looks more and more like a temporary lull. But with basic homeownership now soaking up more than a third of average pay, the stage is set for some potential buyers to be priced out, which would reduce demand and the upward pressure on prices.”
Median home prices in 574 of the 578 analyzed counties are less affordable than historical standards. According to ATTOM, it remains more than double the number of counties that were less affordable than historical levels just two years ago. The four counties more affordable than historical levels are Macon County, Illinois; San Francisco County, California; New York County, New York; and Caddo Parish (Shreveport), Louisiana.
Major homeownership expenses on typical homes were considered unaffordable to average local wage earners in nearly 80% of analyzed counties in the third quarter. Los Angeles County; Cook County (Chicago), Illinois; Maricopa County (Phoenix), Arizona; San Diego County, California; and Orange County, California, are the largest counties considered unaffordable.
According to ATTOM, the nationwide median price of single-family homes and condos increased 2% in the third quarter compared with the second quarter to a new record level of $351,250. The price increases and high interest rates continue to push the typical cost of major ownership expenses up faster than wage growth. ATTOM says annual price appreciation outpaced weekly annualized wage changes in 47% of the analyzed counties. Annual wages of more than $75,000 are needed to pay for major costs on the median-priced homes in 57% of markets analyzed in the report.
Counties where major ownership costs require the largest percentage of wages are concentrated in the Northeast and on the West Coast. Conversely, counties where costs require the smallest portion of average local wages are Macon County, Illinois; Schuylkill County, Pennsylvania; Wayne County, Michigan; and Peoria County, Illinois.