HOME OWNERSHIP SLIGHTLY MORE AFFORDABLE ACROSS U.S. IN THIRD QUARTER BUT STILL DIFFICULT FOR AVERAGE WORKERS

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Sep 26, 2024, 00:01 ET

Major Home-Ownership Expenses Consume 34 Percent of National Average Wage; Portion Ticks Downward as Home-Price Spike Eases and Mortgage Rates Drop; Historical Affordability Also Inches Up While Remaining Weak

IRVINE, Calif., Sept. 26, 2024 /PRNewswire/ -- ATTOM, a leading curator of land, property data, and real estate analytics, today released its third-quarter 2024 U.S. Home Affordability Report showing that median-priced single-family homes and condos remain less affordable in the third quarter of 2024 compared to historical averages in 99 percent of counties around the nation with sufficient data to analyze. The latest trend continues a pattern, dating back to early 2022, of home ownership requiring historically large portions of wages as U.S. home prices keep reaching new highs.

The report also shows that major expenses on median-priced homes currently consume 33.5 percent of the average national wage. That level marks a slight improvement over the second quarter of this year but remains virtually unchanged from a year ago – and still above the common 28 percent lending guideline.

Despite small gains in both the historic and current affordability measures, the third-quarter figures represent ongoing markers of how home ownership remains a financial stretch for average workers around the nation. They come as the national median home price has spiked to $365,000 this quarter and mortgage rates, while declining, remain above 6 percent, helping to keep ownership expenses above what lenders prefer when issuing mortgages.

The portion of average wages nationwide required for typical mortgage payments, property taxes and insurance still sits 12 points above a low point reached early in 2021, right before home-mortgage shot up from the lowest levels in decades.

"Home affordability continues to show signs of easing, which lightens the pressure on house hunters struggling to find a place that fits their budget," said Rob Barber, CEO for ATTOM. "The cost of owning a home across much of the nation remains a tough go for average workers, exceeding levels preferred by banks and other lenders. But it is at least tracking in the right direction. That's mainly because of declining interest rates."

Barber added that last week's half-point cut in the benchmark interest rate by the Federal Reserve "should brighten the prospects for buyers, as long as it doesn't spike demand too much and lead to even higher prices amid the ongoing tight supply of homes for sale around the U.S."

The small shift toward better affordability this quarter comes amid a mix of forces generally, but not completely, working in favor of home buyers.

On the downside for house hunters are home prices and property taxes that continue to rise across the country in 2024, helping to keep affordability at historical lows. At the same time, though, a steady decline in home-mortgage rates in 2024, from more than 7 percent down to close to 6 percent, is acting as a counterweight. In addition, the national median home has increased at a slower pace this quarter versus the prior three-months.

The result over the Summer months has been a 3 percent decrease in the typical cost of major home-ownership expenses at a time when average wages have grown. That combination is pushing affordability back in a better direction for house hunters. While major expenses as a portion of wages is unchanged annually, it has declined for the second straight quarter.

The report determined 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 and condo, assuming a 20 percent down payment and a 28 percent maximum "front-end" debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the U.S. Bureau of Labor Statistics (see full methodology below).

Compared to historical levels, median home ownership costs in 575 of the 578 counties analyzed in the third quarter of 2024 are less affordable than in the past. That is mostly unchanged from both the second quarter of 2024 and the third quarter of 2023, when 574 of the same counties were historically unaffordable.

Historic measures remain negative as the portion of average local wages consumed by major home-ownership expenses on typical homes are considered unaffordable during the third quarter of 2024 in about 80 percent of the 578 counties in the report, based on the 28 percent guideline. Counties with the largest populations that are unaffordable in the third quarter are Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA, and Orange County, CA (outside Los Angeles).

The most populous of the counties with affordable levels of major expenses on median-priced homes during the third quarter of 2024 are Harris County (Houston), TX; Wayne County (Detroit), MI; Philadelphia County, PA; Cuyahoga County (Cleveland), OH, and Allegheny County (Pittsburgh), PA.

View Q3 2024 U.S. Home Affordability Heat Map

National median home price up quarterly and annually in majority of markets
The national median price for single-family homes and condos has risen to $365,000 in the third quarter of 2024. The latest figure represents a 1.4 percent increase over the second quarter of this year and is 6.6 percent above the typical price in the third quarter of 2023, although the pace of increase has slowed compared. (Typical values shot up 7 percent from the first to the second quarter of this year).

At the county level, median home prices have climbed from the second quarter to the third quarter of this year in 363, or 62.8 percent, of the 578 counties included in the report. Annually, they are up in 492, or 85.1 percent of those markets.

Data was analyzed for counties with a population of at least 100,000 with sufficient data and at least 50 single-family home and condo sales in the third quarter of 2024.

Among the 46 counties in the report with a population of at least 1 million, the biggest year-over-year increases in median prices during the third quarter of 2024 are in Wayne County (Detroit), MI (up 12.3 percent annually); Suffolk County (Long Island), NY (up 12.1 percent); Philadelphia County, PA (up 11.8 percent); Cuyahoga County (Cleveland), OH (up 9.6 percent) and Montgomery County, MD (outside Washington, DC) (up 9.4 percent).

Counties with a population of at least 1 million where median prices remain down the most from the third quarter of 2023 to the same period this year are Alameda County (Oakland), CA (down 12.8 percent); Travis County (Austin), TX (down 4.3 percent); Honolulu County, HI (down 3.9 percent); Collin County (Plano), TX (down 1.9 percent) and New York County (Manhattan), NY (down 0.6 percent).

Prices keep improving more than wages around nation
As home values keep rising throughout most of the U.S. this quarter, year-over-year price changes have outpaced changes in weekly annualized wages during the third quarter of 2024 in 411, or 71.1 percent, of the 578 counties analyzed in the report. (Despite that pattern, affordability has improved mainly because of falling mortgage rates).

The latest group of counties where prices have increased more than wages annually include Los Angeles County, CA; Cook County, (Chicago), IL; Harris County (Houston), TX; San Diego County, CA, and Orange County, CA (outside Los Angeles).

On the flip side, year-over-year changes in average annualized wages have bested price movements during the third quarter of 2024 in 167 of the counties analyzed (28.9 percent). The latest group where wages have increased more, or declined less, than median prices include Maricopa County (Phoenix), AZ; New York County (Manhattan), NY; Tarrant County (Fort Worth), TX; Bexar County (San Antonio), TX, and Santa Clara County (San Jose), CA.

Portion of wages needed for home ownership down quarterly but unchanged annually
Amid falling mortgage rates, the portion of average local wages consumed by major expenses on median-priced single-family homes and condos has dropped quarterly in 426, or 73.7 percent, of the 578 counties analyzed.

The typical $2,045 cost of mortgage payments, homeowner insurance, mortgage insurance and property taxes nationwide is down 3.3 percent quarterly from a high point hit in the second quarter of this year. The latest expense level commonly consumes 33.5 percent of the average annual national wage of $73,164. That is down from 34.7 percent the second quarter of 2024 but is unchanged from the third quarter of last year.

Despite the quarterly drop-off, the portion remains far above a recent low point of 21.3 percent hit in the first quarter of 2021.

The expense-to-wage ratio exceeds the 28 percent lending guideline in 453, or 78.4 percent, of the counties analyzed, assuming a 20 percent down payment. That is down slightly from 80.3 percent of the same group of counties in the second quarter of 2024 and 78.7 percent a year ago. But it remains more than twice the level recorded in early 2021.

In about a third of the markets analyzed, major expenses consume at least 43 percent of average local wages, a benchmark considered seriously unaffordable.

The best affordability improvements during the third quarter generally have come in upscale markets concentrated in the West region, where median prices top $450,000. Those counties, however, still among the most unaffordable in the U.S.

Among counties with a population of at least 1 million, the largest quarterly drop-offs in the typical portion of average local wages needed for major ownership expenses are in Orange County, CA (outside Los Angeles) (down from 102.6 percent in the second quarter of 2024 to 95.4 percent in the third quarter of 2024); Travis County (Austin), TX (down from 45.3 percent to 38.5 percent); Contra Costa County, CA (outside Oakland) (down from 69.6 percent to 63.3 percent); Alameda County (Oakland), CA (down from 69.8 percent to 63.6 percent) and Santa Clara County (San Jose), CA (down from 60.9 percent to 55.7 percent).

Home ownership still least affordable along Northeast and West coasts
All but one of the top 30 counties where major ownership costs require the largest percentage of average local wages during the third quarter of 2024 are on the Northeast or West coasts, extending past trends. The leaders are Santa Cruz County, CA (108.5 percent of annualized local wages needed to buy a single-family home); Kings County (Brooklyn), NY (108 percent); Maui County, HI (103.6 percent); Marin County, CA (outside San Francisco) (100.6 percent) and San Luis Obispo County, CA (97.5 percent).

Aside from Kings County, those with a population of at least 1 million where major ownership expenses typically consume more than 28 percent of average local wages in the third quarter of 2024 include Orange County, CA (outside Los Angeles) (95.4 percent required); Queens County, NY (78.9 percent); Los Angeles County, CA (72.6 percent) and San Diego County, CA (71.9 percent).

Counties where the smallest portion of average local wages are required to afford the median-priced home during the third quarter of this year are Cambria County, PA (east of Pittsburgh) (12 percent of annualized weekly wages needed to buy a home); Macon County (Decatur), IL (14 percent); Montgomery County, AL (14.5 percent); Schuylkill County, PA (outside Allentown) (15.8 percent) and St. Lawrence County (Canton), NY (15.9 percent).

Counties with a population of at least 1 million where major ownership expenses typically consume less than 28 percent of average local wages in the third quarter of 2024 include Wayne County (Detroit), MI (17 percent); Philadelphia County, PA (20.7 percent); Cuyahoga County (Cleveland), OH (21.1 percent); Allegheny County (Pittsburgh), PA (22.3 percent) and Harris County (Houston), TX (24.9 percent).

Wages needed to afford typical home is 20 percent more than U.S. average
Major home ownership expenses on typical homes sold in the third quarter of 2024 require an annual income of $87,640 to be affordable, which is 19.8 percent more than the latest average national wage of $73,164.

Annual wages of more than $75,000 are needed to pay for major costs on median-priced homes purchased during the third quarter of 2024 in 324, or 56.1 percent, of the 578 markets in the report. That poses major obstacles as average wages exceed that amount in just 12.8 percent of the counties reviewed.

The 25 largest annual wages required to afford typical homes remain along the east or west coasts, led by San Mateo County, CA ($384,882); New York County (Manhattan), NY ($371,140); Santa Clara County (San Jose), CA ($360,069); Marin County, CA (outside San Francisco) ($328,530) and San Francisco County, CA ($315,157).

The lowest annual wages required to afford a median-priced home in the third quarter of 2024 are in Cambria County, PA (east of Pittsburgh) ($20,775); Schuylkill County, PA (outside Allentown) ($29,959); Montgomery County, AL ($30,746); Bibb County (Macon), GA ($31,289) and Robeson County, NC (outside Fayetteville) ($31,794).

Historical affordability still weak almost everywhere in U.S. but showing signs of improvement
Home ownership is less affordable in the third quarter of 2024 compared to historic averages in 99.5 percent of the 578 counties analyzed. That is about the same as the level in both the second quarter of 2024 and the third quarter of last year - and far higher than the 5.4 percent portion in the first quarter of 2021.

Still, historical indexes improved quarterly in about three-quarters of the counties reviewed, raising the nationwide index from its worst point in 17 years.

Counties with a population of at least 1 million that are less affordable than their historic averages (indexes of less than 100 are considered historically less affordable) include Wayne County (Detroit), MI (index of 60); Mecklenburg County (Charlotte), NC (63); Fulton County (Atlanta), GA (64); Franklin County (Columbus), OH (65) and Oakland County (outside Detroit) (65).

Overall, counties with the worst affordability indexes in the third quarter of 2024 are Montgomery County, PA (outside Philadelphia) (index of 52); Muskegon County, MI (53); Blount County, TN (outside Knoxville) (54); St. Louis County, MO (55) and Beaver County, PA (outside Pittsburgh) (56).

The nationwide index has improved from 73 in the second quarter of 2024 to 75 in the third quarter. Among counties with a population of at least 1 million, those where the index has improved most from the second to the third quarter are Travis County (Austin), TX (index up 18 percent); Palm Beach County (West Palm Beach), FL (up 11 percent); Fulton County (Atlanta), GA (up 10 percent); Contra Costa County, CA (outside Oakland) (up 10 percent) and Alameda County (Oakland), CA (up 10 percent).

Report Methodology
The ATTOM U.S. Home Affordability Index analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM and average wage data from the U.S. Bureau of Labor Statistics in 578 U.S. counties with a combined population of 255.1 million during the third quarter of 2024. Counties in Connecticut were not included in the analysis because the most recent wage data was not available. The affordability index is based on the percentage of average wages needed to pay for major expenses on a median-priced home with a 30-year fixed-rate mortgage and a 20 percent down payment. Those expenses include property taxes, home insurance, mortgage payments and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate monthly house payments.

The report determined affordability for average wage earners by calculating the amount of income needed for major home-ownership expenses on median-priced homes, assuming a loan of 80 percent of the purchase price and a 28 percent maximum "front-end" debt-to-income ratio. For example, affording the nationwide median home price of $365,000 in the third quarter of 2024 requires an annual wage of $87,640. That is based on a $73,000 down payment, a $292,000 loan and monthly expenses not exceeding the 28 percent barrier — meaning wage earners would not be spending more than 28 percent of their pay on mortgage payments, property taxes and insurance. That required income is more than the $73,164 average wage nationwide, based on the most recent average weekly wage data available from the Bureau of Labor Statistics, making a median-priced home nationwide unaffordable for average workers.

About ATTOM
ATTOM provides premium property data and analytics that power a myriad of solutions that improve transparency, innovation, digitization and efficiency in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for more than 155 million U.S. residential and commercial properties covering 99 percent of the nation's population. A rigorous data management process involving more than 20 steps validates, standardizes, and enhances the real estate data collected by ATTOM, assigning each property record with a persistent, unique ID — the ATTOM ID. The 30TB ATTOM Data Warehouse fuels innovation in many industries including mortgage, real estate, insurance, marketing, government and more through flexible data delivery solutions that include ATTOM Cloud, bulk file licenses, property data APIs, real estate market trends, property navigator and more. Also, introducing our newest innovative solution, making property data more readily accessible and optimized for AI applications– AI-Ready Solutions.