Market Trends

Home Ownership Still a Financial Stretch Despite Slight Affordability Improvements

Home ownership has traditionally been considered a cornerstone of the American Dream. However, recent data suggests that for many, this dream is becoming increasingly elusive. According to the first-quarter 2024 U.S. Home Affordability Report released by ATTOM, a leading purveyor of comprehensive land, property, and real estate data, median-priced single-family homes and condos continue to be less affordable compared to historical averages across the nation. This concerning trend indicates that owning a home requires a significantly larger portion of wages than in the past—a pattern that has persisted since 2022.

Affordability Metrics Show Modest Quarterly Gains

In the first quarter of 2024, major expenses for median-priced homes, such as mortgage payments, property taxes, and insurance, consumed 32.3% of the average national wage. This figure represents a marked increase from conventional lending guidelines which typically suggest that housing expenses should not exceed 28% of household income. Although the current measures show slight improvements on a quarterly basis, they remain worse than the figures from a year ago, and still present significant financial challenges for prospective home buyers.

Quarterly Respite Does Not Offset Long-Term Trends

Despite modest quarterly improvements, the overall financial burden of home ownership is up nearly three percentage points from the previous year, and a staggering 11 percentage points since early 2021, the period before mortgage rates began their sharp ascent from historic lows. This exacerbates an already difficult situation where increases in home values and related expenses have surpassed wage growth, even with some easing from the second half of last year into early 2024.

Rob Barber, CEO of ATTOM, commented on the current state of the housing market, "The picture for home buyers is brightening a little again as affordability measures have improved for the second quarter in a row. However, the reality remains that affording a home is still a financial stretch, or a pipe dream, for many households. But with the recent downturn in mortgage rates and modest growth in home prices, it has become slightly easier for average wage earners to afford a home thus far this year. The upcoming Spring buying season will be crucial in determining whether this trend can be sustained."

Market Dynamics and Buyer Assistance

The recent respite for home buyers comes as the national median home price underwent a less-than-2% increase from the prior quarter, with figures still lower than last year’s peaks. Additional aid for buyers is sourced from a decrease in mortgage rates that now fall below 7% for a 30-year fixed loan—a notable drop from the nearly 8% rates seen in 2023. Concurrently, inflation rates have dropped to approximately 4%, significantly less than the spike experienced in 2021.

The report from ATTOM analyzed affordability for average wage earners by calculating the income required to manage monthly home ownership expenses on a median-priced single-family home, assuming a 20% down payment. This income was then compared to average weekly wage data from the U.S. Bureau of Labor Statistics. Based on these calculations, the report highlights that affording a median-priced home remains problematic in 577 of the 590 counties studied in the first quarter of 2024.

Geographic Disparities in Home Affordability

The counties with the largest populations where home-ownership expenses continue to be unaffordable include Los Angeles, California; Maricopa (Phoenix), Arizona; San Diego, California; Orange County, California; and Miami-Dade County, Florida. In contrast, the most populous counties where major expenses on median-priced homes remain within reach for average local wage earners are Cook (Chicago), Illinois; Harris (Houston), Texas; Wayne (Detroit), Michigan; Philadelphia, Pennsylvania; and Oakland County, Michigan.

For a visual representation of these affordability trends, interested parties are encouraged to review the Q1 2024 U.S. Home Affordability Heat Map.

Mixed Signals in Housing Market Trends

While the national median home price of $336,250 in the first quarter of 2024 has seen growth, it remains $9,000 below the all-time high registered in previous years. Analyses conducted for counties with populations above 100,000 and with at least 50 single-family home and condo sales indicate mixed signals:

Counties Experiencing Median Price Increases

• Orange County, CA (up 14.6%)
• Santa Clara County (San Jose), CA (up 10.3%)
• Palm Beach County (West Palm Beach), FL (up 9.9%)
• Nassau County, NY (up 8.9%)
• Miami-Dade County, FL (up 8.7%)

Counties with Declining Median Prices

• Travis County (Austin), TX (down 8.1%)
• New York County (Manhattan), NY (down 7.9%)
• Bexar County (San Antonio), TX (down 3.8%)
• Tarrant County (Forth Worth), TX (down 3.2%)
• Alameda County (Oakland), CA (down 2.5%)

In over half the counties analyzed, home prices have escalated faster than wages, placing additional strain on home affordability.

Escalating Prices Versus Wage Growth

There is a striking mismatch between home prices escalation and wage growth, with prices outpacing wages in approximately 61% of analyzed counties. However, in close to 39% of the counties, wages have managed to keep pace with or exceed price changes, offering a glimmer of hope for some potential home buyers.

Wage-to-Ownership Cost Ratios Provide Mixed Outlook

Recent quarters have shown a drop in the percentage of wages necessary for home ownership as mortgage rates have trended downwards. Despite this quarterly respite, the expense-to-wage ratio remains elevated annually in the majority of the markets analyzed. Essential home-ownership costs still consume a significantly larger portion of average wages than in the recent past, with many regions recording ratios well above the 28% lending guideline.

Coastal Regions Struggle with Affordability

When analyzing affordability by region, the Northeast and West Coasts continue to struggle disproportionately. Counties such as Kings (Brooklyn), NY and Marin, CA, top the list where major ownership costs require the highest percentage of local wages to own a home.

Conversely, more affordable counties exist, such as Macon (Decatur), IL and Schuylkill, PA, where a smaller portion of wages is required. In some populous counties like Wayne (Detroit), MI and Allegheny (Pittsburgh), PA, major ownership expenses require less than the 28% guideline for average local wages.

Overall Affordability Continues to Decline

A staggering 98% of counties remain less affordable than their historic averages. Though these figures are marginally better than those from the end of 2023, the long-term trend is clear: the vast majority of local markets have experienced a decline in affordability when compared to historical standards, with indexes reaching some of the lowest points in over a decade.

A handful of counties, however, tell a different story by showing improved affordability relative to historic averages. These exceptions include Jefferson (Birmingham), AL and Macon (Decatur), IL.

Methodology Behind the Report

The methodology used to determine the affordability indexes involved comparing median home prices with average wage data, using a standard 30-year fixed-rate mortgage with a 20% down payment. The affordability index hinges on the percentage of wages required for major home ownership expenses, including taxes, insurance, and mortgage payments.

About ATTOM and Data Accessibility

ATTOM remains a vital source for comprehensive property data, supporting various industries from real estate and mortgage to insurance, marketing, and government. ATTOM's data management process involves rigorous validation and standardization to ensure the highest quality. Through solutions like ATTOM Cloud, bulk file licenses, APIs, and more, the company furthers innovation and efficiency within the data-driven economy.

For those interested in learning more about ATTOM and exploring their resources, you can find additional insights here.

Taking Stock of the Affordability Crisis

The report's findings are an essential gauge of the nation's economic landscape, particularly regarding the housing market. It helps stakeholders understand the challenges many face in attaining home ownership and the broader economic conditions affecting affordability.

To explore the full scope of the U.S. Home Affordability Report, access comprehensive resources, or reach out with inquiries about data and licensing, please refer to the contacts section within the report, where you can connect with experts like Megan Hunt for media-related questions or inquire about data and report licensing via their respective [email protected] email addresses.

Conclusion

As the housing market evolves into 2024, it's apparent that challenges remain for prospective home buyers, especially those relying on average wages. While slight improvements offer a glimpse of hope, the overall scenario continues to highlight the significant disparities in affordability across the country. This comprehensive analysis by ATTOM reinforces the pressing need for innovative solutions to address the affordability crisis and ensure that the dream of home ownership remains attainable for all Americans.

Contact Information:

• Media Contact: Megan Hunt, [email protected]
• Data and Report Licensing: [email protected]
• Source: ATTOM

As the data unfolds, home buyers, investors, and policymakers alike will be watching closely to see if affordability will further improve, stabilize, or possibly deteriorate in the ever-changing real estate landscape of the United States.