Homes Just A Bit More Affordable In Q1: ATTOM
'The soaring housing market has finally come back down in much of the U.S., at least for now.'
- The portion of average wages nationwide required for typical major home-ownership expenses fell slightly to 30% in the first quarter.
- The 30% of wages required for home-ownership expenses is still considered unaffordable by common lending standards.
- The nationwide median single-family home and condo price is up less than 1% from the fourth quarter of 2022.
It was just a small improvement, but buying a home was slightly more affordable in the first quarter, according to a report from ATTOM.
The curator of land, property, and real estate data said Thursday that the portion of average wages nationwide required for typical major home-ownership expenses fell slightly to 30% in the first quarter from 31% in the final quarter of last year.
Even with that small decline, ATTOM’s latest U.S. Home Affordability Report showed that median-priced single-family homes and condos were still less affordable in the first quarter of 2023 compared to historical averages in 94% of counties nationwide with enough data to analyze — far above the 62% of counties that were historically less affordable in the first quarter of 2022.
In addition, the 30% of wages required for home-ownership expenses is still considered unaffordable by common lending standards, which call for a 28% debt- to-income (DTI) ratio. It also remains well above the 25% level a year earlier.
The mixed picture facing home buyers — with prices that remain a financial stretch but are getting a bit more affordable — reflects a softening of the U.S. housing market combined with rising wages at a time when home-mortgage rates have stabilized following a year of increases, ATTOM said.
The nationwide median single-family home and condo price is up less than 1% from the fourth quarter of 2022 to the first quarter of 2023, and now sits at $320,000, while three quarters of local markets continue to see prices slip this year.
Those trends have followed an 8% decrease in the nationwide median during the second half of 2022. The drop-off has come as rising interest rates, high consumer-price inflation, and stock market declines have cut into what home seekers can afford or the resources they have for down payments, ATTOM said.
At the same time, wages have risen 6% nationwide over the past year, with increases continuing into the second half of 2022 in most of the country.
“The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing,” said Rob Barber, ATTOM CEO. “That’s produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened out.”
“Things certainly haven’t swung way back into friendly territory,” Barber continued. “Price drops and wage gains haven’t yet translated into equal improvements in affordability. And the trend could go back the other way if interest rates go up again, as expected. But the scenario is becoming more favorable for buyers.”
With multiple uncertain economic forces at work, the market could continue sliding or turn back upward this spring and summer, ATTOM said. That, along with the path of wages, will dictate whether home ownership continues to grow more affordable after a gradual path the other way over the past few years.
ATTOM said its latest report determined affordability for average wage earners by calculating the amount of income needed to meet major monthly home ownership expenses — including mortgage, property taxes, and insurance — on a median-priced single-family home and condo, assuming a 20% down payment and a 28% maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.
Compared to historical levels, median home prices in 537 of the 572 counties analyzed in the first quarter of 2023 are less affordable than in the past, the report found. The latest number is down from 565 of the same group of counties in the fourth quarter of 2022, but remains far more than the 356 in the first quarter of 2022 and just 91, or less than one-fifth, that were less affordable historically two years ago.
Meanwhile, major home-ownership expenses on typical homes are considered unaffordable to average local wage earners during the first quarter of 2023 in 373, or about two-thirds, of the 572 counties in the report, based on the 28% guideline.
Counties with the largest populations that are unaffordable in the first quarter were Los Angeles County; Maricopa County (Phoenix), Ariz.; San Diego County; Orange County, Calif.; and Kings County (Brooklyn), N.Y.
The most populous of the 199 counties where major expenses on median-priced homes remain affordable for average local workers in the first quarter of 2023 were Cook County (Chicago), Ill.; Harris County (Houston), Texas; Wayne County (Detroit), Mich.; Philadelphia County, Pa.; and Franklin County (Columbus), Ohio.
Home Prices Flatten
The recent slowdown in the U.S. housing market after 10 years of increases has flattened the national median single-family home and condo value, while pushing prices down in most counties so far this year, the report states.
Nationwide, the median single-family home, and condo value of $320,000 in the first quarter of 2023 is virtually the same as the typical $318,000 price in the fourth quarter of 2022 and is up just 1.3% from $316,000 in the first quarter of last year.
At the local level, median home prices in the first quarter of 2023 remain up from the first quarter of last year in 371, or 65%, of those counties.
Data was analyzed for counties with a population of at least 100,000 and at least 50 single-family home and condo sales in the first quarter of 2023.
Among the 46 counties in the report with a population of at least 1 million, the biggest year-over-year increase in median sale prices during the first quarter of 2023 are in St. Louis County, Mo. (up 38%); Palm Beach County (West Palm Beach), Fla. (up 11%); Collin County (Plano), Texas (up 10%); Franklin County (Columbus), Ohio (up 7%) and Miami-Dade County, Fla. (up 6%).
Counties with a population of at least 1 million where median prices have dropped most from the first quarter of 2022 to the same period this year are Alameda County (Oakland), Calif. (down 16%); Santa Clara County (San Jose), Calif. (down 12%); Contra Costa County, Calif. (outside San Francisco) (down 12%); Philadelphia County, Pa. (down 11%) and King County (Seattle), Wash. (down 8%).
Mortgage Costs Dip
The report also noted that, with 30-year mortgage rates leveling off this year after doubling in 2022, the portion of average local wages consumed by major expenses on median-priced, single-family homes and condos has decreased from the fourth quarter of 2022 to the first quarter of 2023 in 97% of the 572 counties analyzed.
The typical $1,758 cost of mortgage payments, homeowner insurance, mortgage insurance, and property taxes nationwide now requires 29.9% of the average annual $70,460 wage. That is down from 31.2% in the fourth quarter of 2022 — the highest level in 15 years — although still up from 24.9% a year ago.
The latest portion still tops the 28% lending guideline in 373, or about three-quarters of those counties, assuming a 20% down payment. But that is down from 407, or almost three-quarters, of the same group of counties in the fourth quarter of 2022.
“The affordability gains we are seeing so far this year, small as they are, could start to lure buyers back into the markets where they were once put off by soaring prices,” Barber said. “That would help all segments of the market, especially high-end areas that suffered some of the larger price declines since the market started to stall last year.”