Attom, a prominent national real estate and land data curator, recently made public its U.S. Home Affordability Report for the third quarter of 2022. The report offers a deep dive into the housing affordability situation in the United States. It highlights a worrisome reality: For a considerable number of residents in Montgomery County, along with the vast majority of potential homebuyers and renters across the United States, owning a home is becoming an increasingly elusive dream.
This comprehensive analysis shows a significant shift in housing affordability over the last year. Median-priced single-family homes and condominiums are less affordable now than they were in the same period in 2021 in a staggering 99 percent of the 581 U.S. counties studied. This figure represents a stark increase from the 69 percent recorded in the third quarter of 2021.
Declining Affordability and the Ever-widening Gap Between Wages and Home Prices Cast a Long Shadow Over the American Dream
Rick Sharga, the Executive Vice President of Market Intelligence at Attom, illuminated the bleak reality of the situation in a recent statement. “Although home prices have seen a slight reduction quarter-over-quarter, they remain higher than they were a year ago. Compounded with the fact that interest rates have virtually doubled, it’s easy to see why many hopeful homebuyers simply can’t afford their desired homes. In many cases, they no longer even qualify for the necessary mortgage,” he said.
According to the report, one of the driving factors behind the soaring prices is the relentless demand for houses, with prospective homeowners continuously pursuing an extremely limited supply of properties on the market. Despite the high demand, home sales have dwindled as mortgage rates have steadily risen over the year, transitioning from just above 3 percent to nearly 6 percent for a standard 30-year loan.
Delving deeper into historical home affordability trends, Attom’s quarterly report casts a spotlight on communities where home prices have raced ahead of wage growth, as well as the typical annual income required to purchase a home.
Measuring the Cost of the American Dream: An Analysis of Housing Affordability for Average Wage Earners
The report determines affordability for average wage earners by computing the income necessary to meet monthly house payments. These calculations include mortgage, property taxes, and insurance on a median-priced home, assuming a 20 percent down payment and a maximum debt-to-income ratio of 28 percent. This information is subsequently compared to annualized average weekly wage data obtained from the Bureau of Labor Statistics.
As an illustration of the report’s findings, here’s a snapshot of the housing affordability and wage growth situation in Montgomery County:
- Population: 1,062,061
- Total housing units: 404,423
- Q3 2022 median home price: $572,500
- Year-over-year median home price growth: 4.4 percent
- Annualized weekly wages: $89,167
- Year-over-year wage growth: 0.5 percent
- Q3 2022 Affordability Index: 90
The Affordability Index indicates that if a county’s score is below 100, it signifies that average home prices are less affordable compared to past standards.
Historical Perspective on Home Affordability: A Nationwide Surge in Home Prices Outpaces Wage Growth
When comparing the present situation to historical levels, the report highlights that median home prices in 574 out of 581 (or 99 percent) of the examined counties are less affordable than before. On a nationwide scale, the median home price has surged by 10 percent over the last year, while the average annual wage across the country has risen by a mere 6 percent.
The report includes 48 counties, each with a population of at least 1 million. The greatest year-over-year increases in median home prices during Q3 2022 were observed in the following counties:
- St. Louis County, Missouri (up 37 percent)
- Collin County, Texas (up 25 percent)
- Hillsborough County, Florida (up 24 percent)
- Palm Beach County, Florida (up 21 percent)
- Tarrant County, Texas (up 19 percent)
In 488 of the 581 counties analyzed in the report, home prices have grown faster than weekly annualized wage growth. The most significant discrepancies were found in:
- Los Angeles County, California
- Harris County, Texas
- Maricopa County, Arizona
- San Diego County, California
- Orange County, California
On a positive note, wage growth managed to outpace home prices in only 93 counties in Q3 2022. The largest of these include:
- Cook County, Illinois
- King County, Washington
- Santa Clara County, California
- Alameda County, California
- Philadelphia County, Pennsylvania