ATTOM: For the Average Buyer, Homes Are More Affordable Today

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ATTOM Data Solutions’ second-quarter 2020 U.S. Home Affordability Report suggests that the median home prices of single-family homes and condos are more affordable than historical averages in 49% of U.S. counties , up from 31% a year ago.

The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments – including mortgage, property taxes and insurance – on a median-priced home, assuming a 3% down payment and a 28% maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.

Compared to historical levels, 200 of the 406 counties analyzed in the second quarter are now more affordable, up from 126 of the same group of counties in the second quarter of 2019. The gains have come as higher wages, along with cheaper mortgage costs resulting from declining interest rates, outweigh ongoing price increases that commonly have exceeded 5% in the current quarter. 

Despite the improved buying conditions, major costs on median-priced homes remain unaffordable to average wage earners in 74% of counties included in the second-quarter 2020 analysis. That means major homeownership costs would consume more than 28% of average wages from county to county.

“The latest affordability numbers reveal a win-win situation for sellers as well as buyers,” says Todd Teta, chief product officer with ATTOM Data Solutions. “Prices are rising again around the country during the current home-buying season, despite worries that the economic impact of the coronavirus pandemic would halt the nine-year run-up in home values.

“But a combination of wage gains and declining mortgage rates are helping to override the increases and make homes more affordable in large swaths of the United States,” he adds. “Virus pandemic concerns are still quite valid and may show up in the coming months, which could hurt prices as well as affordability. That remains a significant potential cloud hanging over the market. But as of now, things are looking up for people on both sides of the buying equation.”

For more insights from ATTOM’s new report, click here.

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