Affordability dropped in the second quarter, sinking to its lowest level since 2008, according to the Q2 2017 U.S. Home Affordability Index by ATTOM Data Solutions, a multi-sourced property database.
The median national home price came in at $253,000 in the second quarter, hitting a nine-year low in affordability at the lowest level since the third quarter of 2008, the report shows. This is up 7.7% from last year, the largest annual increase since the first quarter of 2014.
But as home prices increased, the average weekly wage nationwide dropped to $1,067 in the fourth quarter, down 1.4% from last year. This represents the largest annual decrease since the fourth quarter in 2011.
ATTOM’s national home affordability index came in at 100 in the second quarter, the lowest index level since it stood at 86 in 2008.
About 45%, about 210 out of 464 counties analyzed for the index, were less affordable than their historic norms in the second quarter. This represents the highest share of markets historically less affordable since the fourth quarter of 2009.
“While home price appreciation in the second quarter accelerated to the fastest pace in more than three years, wage growth turned negative, posting the biggest year-over-year decrease in five years in Q4 2016 — the most recent average weekly wage data available,” ATTOM Senior Vice President Daren Blomquist said.
“That combination of accelerating home price growth and slowing wage growth, along with mortgage interest rates that are up nearly 50 basis points from a year ago, eroded home affordability nationwide to the lowest level in nearly nine years, and pushed the highest share of markets beyond the threshold of normal affordability in nearly eight years,” Blomquist said.
And this declining affordability doesn’t look like it will reverse anytime soon, one expert pointed out.
“Unfortunately, I do not expect see any substantial growth in the number of homes going on the market through the balance of 2017 and this will continue to erode affordability as buyers compete for the few homes that are available to them,” said Matthew Gardner, Windermere Real Estate chief economist.
However, a study from First American Financial Corp. disagrees. The Real House Price Index, the company’s measure of affordability, showed the market became more affordable in April, and is a full 33.6% below their housing boom peak.