Real Estate

Housing affordability retreats in fourth quarter

The average homeowner will spend 35% of their income when purchasing a home

In the fourth quarter of 2018, the median home price reached the least affordable level since the third quarter of 2008, according to ATTOM Data Solutions.

ATTOM’s Home Affordability Report revealed that the home affordability index fell from 94 in Q3 to 91 in Q4, marking the second lowest reading since Q3 of 2008 when affordability fell to 87.

"While poor home affordability continues to cloud the U.S. housing market, there are silver linings in the local data as home price appreciation falls more in line with wage growth," ATTOM Data Solutions Senior Vice President Daren Blomquist said. "Affordability improved from the previous quarter in more than half of all local markets, and one in five local markets saw annual wage growth outpace annual home price appreciation, including high-priced areas such as San Diego, Brooklyn and Seattle."

According to ATTOM’s analysis, 76% of the 469 counties analyzed in the report posted an affordability index below 100 in Q4 of 2018. However, this level was down from a 10-year high in Q3 when 78% of counties posted an affordability index below 100.

Notably, home affordability improved in 58% of local markets in Q4, counter to the national trend. In these markets, 272 of the 469 counties saw home prices retreat.

ATTOM also highlights that wages climbed faster than home prices in 22 markets. In fact, the median home sales price nationwide in Q4 rose 9% from the previous year to $241,250. Furthermore, the annualized average weekly wage increased 3% from 2017, coming in at $56,381 in Q4.

Lastly, purchasing a median-priced home now requires 35% of an average wage earner's income, increasing from the historical average of 32%. Interestingly, prospective buyers in 15% of local markets will now need an income of $100,000 to purchase a home.

NOTE:  ATTOM’s Home Affordability Report index is based on the percentage of income needed to purchase median-priced home relative to historic averages. Notably, an index above 100 indicates median home prices are more affordable than the historic average, while an index below 100 means median home prices are less affordable than the historic average.

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