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Housing market prices are more unaffordable than ever in 99% of U.S. counties

Housing prices in 99% of U.S. counties are more unaffordable than ever for the average American earner, according to a new report from the real estate data site Attom.

Median-priced single-family homes and condos are “less affordable in the third quarter of 2023 compared to historical averages in 99% of counties around the nation” out of the 578 counties included in the report with enough data to analyze, Attom stated in a news release last week on its latest U.S. Home Affordability Report.

“The latest trend continues a two-year pattern of home ownership getting more and more difficult for average U.S. wage earners,” Attom reported.

Home prices outpacing wages

Even though mortgage interest rates remain elevated amid the Federal Reserve’s battle with record levels of inflation, U.S. housing market prices have remained stubbornly high and in many areas have continued to grow even as sales have slowed dramatically compared to the pandemic housing frenzy in 2020, 2021 and early 2022.

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The result has been worsening affordability across the nation. In the third quarter of 2023, home prices and mortgage rates have continued to strain the budgets of home shoppers and “help push the typical portion of average wages nationwide required for major home-ownership expenses up to 35%.”

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Common lending standards call for a 28% debt-to-income ratio. The 35% figure marks the “highest level since 2007 and stands well above the 21% figure from early in 2021, right before home-mortgage rates began shooting up from historic lows,” Attom reported.

“This pattern really jumps out,” said Rob Barber, CEO for Attom. “While lenders will often push the 28% rule, especially if buyers have lots of financial resources outside of wages, we now are seeing fully three-quarters of markets around the country pushing the basic lending benchmark.”

The typical monthly cost for a mortgage, plus homeowner insurance, mortgage insurance and property taxes, hit $2,053 in the third quarter, according to Attom, which reported it’s the “first time ever” that figure has exceeded $2,000.

The cost of that typical monthly payment now consumes 34.6% of the average national wage of $71,214, Attom reported.

A household is considered cost-burdened or “house poor” when it spends more than 30% of its income on rent and utilities and is severely cost-burdened when it spends more than 50% of its income on those expenses, according to the National Low Income Housing Coalition.

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Counties with the largest annual increase in the portion of average local wages needed for major ownership expenses include Santa Cruz County, California (up from 101.9% in the third quarter of 2022 to 122.7% in the third quarter of 2023); Orange County, California (outside Los Angeles, up from 73.8% to 94.6%); Monterey County, California (up from 84.4% to 105.3%); Beaufort County (Hilton Head), South Carolina (up from 52% to 68%), and Santa Barbara County, California (up from 69.6% to 84.9%).

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U.S. home prices set yet another record

Still, home prices are continuing to climb. Nationwide, the median price of single-family homes and condos was up 2% from the second quarter of 2023, to a new record of $351,250, according to Attom.

Housing market price gains are now growing faster than wages in almost half of the U.S., with 272 of the 578 counties analyzed seeing annual price appreciation outpacing weekly annualized wage changes from the third quarter of last year to the third quarter of this year. Those included Cook County (Chicago), Illinois; San Diego County, California; Orange County, California (outside Los Angeles); Miami-Dade County, Florida, and King County, Washington (Seattle).

For the fourth month in a row, home prices climbed in August and set yet another record, according to data released Monday by Black Knight. Nationally, home prices are now 2.5% above their 2022 peak on a seasonally adjusted basis, with two-thirds of major markets surpassing their own previous record highs, according to the firm, part of Intercontinental Exchange, Inc.

“After essentially flattening earlier this year, year-over-year home price growth has been reaccelerating for the last few months,” said Andy Walden, vice president of enterprise research for Black Knight. Price gains stayed “strong” and “widespread” in August, with prices up by over 0.75% in nearly half of the nation’s 50 largest markets, he said.

“Either way you look at it, the increase was sufficient to push annual appreciation up to a stronger-than-expected +3.8%,” Walden said.

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The big question is, where is the breaking point for homebuyers? As home ownership continues to get yanked higher and higher out of reach for the average American earner, at what point will enough buyers be priced out that it begins to impact prices?

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We’ve yet to see that happen, and a big part of that has to do with a nationwide housing shortage that continues to drive demand and keep the housing market moving, aggravated by the market’s thin inventory as would-be sellers hang on to their low mortgage rates.

“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,” Barber said.

“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,” Barber added. “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.”

Economic factors will influence what happens to home prices heading into 2024. Some firms are predicting prices to tip back down, while others are expecting them to continue to climb. Much of it depends on whether mortgage rates continue to soar or if they taper — and if the Federal Reserve is able to pull off a “soft landing” to avoid a major recession. Fannie Mae is continuing to predict a mild recession as the “likeliest outcome” in 2024.

“We will see how this shakes out as the peak 2023 buying season winds down,” Barber said.




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