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Photo: Robert Clark
Falling national inventory levels are pushing national home prices up and, as a result, only about one third of median-priced homes are affordable to those Americans earning the average wage.
That’s according to a report released today by ATTOM Data Solutions, a multi-sourced national property data warehouse.
Median-priced homes were not affordable to average wage earners in 68 percent of housing markets in the first quarter of 2018. And some 41 percent of national housing markets were less affordable than “their historic affordability averages” in the first quarter of 2018, up from 35 percent last year.
Unsurprisingly, many hot West Coast markets topped the list of unaffordable markets for average wage earners. Los Angeles, CA, San Diego, CA, Phoenix, AZ and Orange County, CA were among the markets determined to be unaffordable for average wage earners.
New York City also made the unaffordable list, where the annualized weekly average income is $45,188 but the necessary annual salary to buy a median priced home is over three times higher at a whopping $191,183.
Markets that were still affordable to average wage earners included Chicago, IL, Houston, TX, Detroit, MI, Atlantic City, NJ and Philadelphia, PA.
There is a strong correlation between the job markets and the affordable metros.
“There is such a thing as a market that is too affordable because underlying economic weakness is weakening demand for homes and therefore keeping home prices low,” Daren Blomquist, senior vice president with ATTOM Data Solutions, tells BuzzBuzzNews.
Blomquist says that Atlantic City and Detroit are good examples of such markets where homes are very affordable for average wage earners but where an above-average unemployment rate and population loss means that there is weak demand for homes.”
“Not too hot and not too cold — that indicates a good balance of strong demand and ample supply that will ensure that home sales and prices will continue to grow and a measured, sustainable pace.”
Meantime, the affordability crisis is beginning to spread out of the coastal markets and move in-land as frustrated homebuyers move in search of affordable housing. The migration of homebuyers is now causing home prices to rise above historically normal affordability levels in these markets.
Over 70 percent of all housing markets posted worsening affordability in the first quarter compared to the same time last year. Adding fuel to fire, home price appreciation outpaced average weekly wage growth in 83 percent of housing markets studied in the first quarter of 2018.
“Coastal markets are the epicenter of the US home affordability crisis, but affordability aftershocks are now being felt further inland as housing refugees migrate from the high-cost coastal markets to lower-priced markets in the middle of the country where good jobs are available,” says Blomquist.
Eight of the top 10 counties with the highest median home prices in the first quarter of 2018 also reported strong outward migration or negative population growth — Brooklyn and Manhattan were among those counties.
Yet, San Francisco still reported solid population growth in the first quarter despite being one of the 10 highest priced counties.
In order to determine housing affordability for average wage earners, ATTOM calculated the income needed to make monthly housing payments on a median priced home — including mortgage payments, property taxes and insurance.
ATTOM assumed buyers made a 3 percent downpayment and there was a 28 percent maximum “front-end” debt-to-income ratio. The required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.
Click here to read the entire report.