U.S. Housing Affordability Falls to Decade Low in the Second Quarter

  • Americans who earn the average wage cannot afford a home in 75 percent of housing markets as of the second quarter.
  • Nationwide, home prices have outpaced wage growth from the second quarter of 2017. Home prices are growing faster than incomes in eight of nine Bay Area counties.
  • Marin County homebuyers will spend the highest amount of their annual incomes on a mortgage payment in the country, an average of 133.2 percent.

Home price gains continue to outstrip wage growth as the second quarter comes to an end, with three Bay Area counties ranking among the nation’s five least affordable.

That’s according to ATTOM Data Solutions’ latest U.S. Home Affordability report, which calculates affordability based on the percentage of average wages needed to purchase the median-priced home, assuming a 3 percent down payment and a 30-year, fixed-rate mortgage. The company then assigns an affordability value to a housing market compared with its historic average; index numbers above 100 mean that a city is more affordable than its historic average, while those below 100 indicate that a market is less affordable than its historic norm.

Nationwide, the affordability index has fallen to 95 in the second quarter, down on both a quarterly and yearly basis and the lowest level since the third quarter of 2008. Assuming a debt-to-income ratio of 28 percent, a worker earning the average wage would not qualify for a mortgage in 75 percent of the more than 430 U.S. counties included in the analysis.

The second quarter’s median sales price is $245,000, up by 4.7 percent year over year. Still, that is outstripping the annual wage gain of 3.3. percent, and over the past six years, home prices have increased by 75 percent while wages have grown by 13 percent.

All nine Bay Area counties are now less affordable than their historic averages. Three local counties have among the five lowest affordability index readings in the country for markets with populations of at least 1 million: Alameda (81), Santa Clara (82), and San Francisco (83).

Buying a home in Marin County requires the highest amount of average income in the U.S., 133.2 percent of the annualized weekly wage of $68,302 to purchase the median-priced $1,197,250 home. San Francisco also ranks in the top five in that respect, with buyers shelling out 97.2 percent of their annual $109,083 incomes to buy the median-priced $1,400,000 home.

Eight of nine counties saw home prices grow faster than wages from the second quarter of 2017, with only Napa posting a modest improvement. Affordability is eroding quickly in Santa Clara County, where home prices appreciated by 25.5 percent year over year but wages grew by only 7.2 percent.

(Photo: iStock/Fodor90)

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