Home prices are heating up again, and incomes are not catching up, because even though household incomes jumped sizeably last year, home prices rose far faster.
The result: One in four housing markets is now less affordable than its long-term historical norm and 63 percent of U.S. counties are seeing home affordability worsen compared to a year ago, according to ATTOM Data Solutions.
“Last quarter we did see signs that wage growth was kicking in and getting stronger, but the latest round of wage data at the county level is showing that trend reverse. That worsened affordability in many markets,” said Daren Blomquist, senior vice president at ATTOM, which determines affordability based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment — including property taxes and insurance.
While housing markets on the coasts continue to be most expensive, the drop in affordability is now most pronounced in markets like Houston, Dallas and Denver.
“Some silver lining in this report is that affordability actually improved in some of the highest-priced markets (like San Francisco) that have been bastions of bad affordability, mostly the result of annual home price appreciation slowing to low single-digit percentages in those markets,” said Blomquist. “This is an indication that home prices are finally responding to affordability constraints — a modicum of good news for prospective buyers who have been priced out of those high-priced markets.”