Homeownership was slightly less affordable in the first quarter compared with the fourth quarter, according to ATTOM’s U.S. Home Affordability Report.
The report shows that homes were less affordable compared with historical norms in 97% of U.S. counties with enough data to analyze.
The latest trend extends a three-year pattern of homeownership requiring historically large portions of wages as U.S. home prices stay at or near record levels, ATTOM says.
The report also shows that major expenses on median-priced homes currently consume 32% of the average national wage. That level is virtually the same as in the fourth quarter, although about one percentage point up from a year ago, keeping it above the common 28% lending guideline preferred by mortgage lenders.
The report determines affordability for average wage earners by calculating the amount of income needed to meet major monthly home ownership expenses — including mortgage payments, property taxes and insurance — on a median-priced single-family home, assuming a 20% down payment and a 28% maximum “front-end” debt-to-income ratio. That required income is measured against annualized average weekly wage data from the U.S. Bureau of Labor Statistics.
ATTOM says the national median home price dipped slightly in the first quarter, to $351,000, due the typically slow Winter home-buying season.
But with mortgage rates still near 7%, the drop-off in home prices was too small to push the ratio of ownership expenses to wages back into the affordable range.
“Home affordability is in a holding pattern this quarter – financially stressful for average wage earners but not changing much,” says Rob Barber, CEO for ATTOM, in the report. “This is not unusual during the Winter lull when home prices level out. A recent small decline in mortgage rates surely hasn’t hurt either for fledgling buyers. If history is a good guide, prices will rise as we head into the peak buying season that’s about to start, which will worsen affordability measures.”
Barber adds, however, that “With so much economic uncertainty these days connected to investment markets, federal policy shifts and very mixed economic forecasts, it is anyone’s guess how much prices will move.”
Photo: Blake Wheeler