It’s not as tough as you might expect for the average worker in Rockville to buy a single-family home or condo. A new report on homeownership affordability for the third quarter sheds light on this.
National Affordability Trends
According to the Home Affordability Report from ATTOM, a leading real estate data curator, the affordability of median-priced single-family homes and condos has decreased compared to historical averages in 99 percent of U.S. counties with sufficient data. Across the country, home affordability has worsened due to a series of Federal Reserve interest rate hikes, leading to the highest mortgage costs in 21 years. This trend has been ongoing for the past two years, making homeownership increasingly difficult for the average U.S. wage earner.
Montgomery County’s Affordability
In Montgomery County, the affordability index stands at 105. This index measures the percentage of average wages needed to cover major expenses for a median-priced home with a 30-year fixed-rate mortgage and a 20 percent down payment. An index below 100 indicates less affordability compared to historical averages.
The median cost of a single-family home in Montgomery County for the first quarter is $500,000. To afford this, average wage earners need to make at least $90,374 and be ready to spend 35.2 percent of their annual pay on their mortgage.
Rising Home Prices and Interest Rates
The report also highlights a 1.3 percent year-over-year increase in median home sale prices in Montgomery County. High interest rates and rising sales prices have pushed major homeownership expenses up by 35 percent, requiring a 28 percent debt-to-income ratio. This is the highest level since 2007 and significantly higher than the 21 percent figure from early 2021, just before mortgage rates began to rise from historic lows.
National Housing Market Trends
Nationally, the median cost of a single-family home or condo has risen by 2 percent from the second quarter to a record high of $351,250. Despite an 11-year housing boom, home prices continue to climb faster than wages, leading to declining affordability.
Rob Barber, CEO of ATTOM, commented on the situation, stating, “The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans. With basic homeownership taking up more than a third of average pay, some buyers may be priced out, which could reduce demand and alleviate the upward pressure on prices.”
Affordable Areas in the U.S.
Despite these trends, there are still areas in the U.S. where single-family homes remain affordable relative to wages. These include Harris County (Houston), Texas; Wayne County (Detroit), Michigan; Philadelphia County, Pennsylvania; Cuyahoga County (Cleveland), Ohio; and Allegheny County (Pittsburgh), Pennsylvania.
These findings suggest that while affordability is a growing challenge nationwide, certain regions still offer more favorable conditions for homeowners.