The absence of affordable homeownership opportunities worsened during the third quarter, according to new data from ATTOM.
Increasing home prices and mortgage rates have resulted in a new environment where the typical portion of average wages nationwide required for major home-ownership expenses is now up to 35% – a level that ATTOM declared unaffordable by common lending standards, which traditionally called for a 28% debt-to-income ratio. The current level is the highest since 2007 and is far above 21% figure from early 2021, before home mortgage rates began rising from historic lows.
ATTOM noted median home prices in 574 of the 578 counties analyzed in the third quarter of 2023 are less affordable than in the past – up from 568 of the same group of counties in the second quarter of this year and 552 in the third quarter of 2022. At the same time, major homeownership expenses on typical homes are considered unaffordable to average local wage earners in 457 of the 578 counties in the ATTOM data report. The counties with the largest populations that are unaffordable in the third quarter are Los Angeles County in California, Cook County (Chicago) in Illinois, Maricopa County (Phoenix) in Arizona, and California’s San Diego County and Orange County.
“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,” said Rob Barber, CEO for ATTOM. “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. 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. We will see how this shakes out as the peak 2023 buying season winds down.”
