Sullivan, Washington counties homes cost more, still affordable for average wage earner

The good news about Sullivan County’s housing market is it has seen strong grown for the past four quarters. The not-so-good news is the homes are now less affordable. At the same time Washington County, which has the region’s most expensive homes, saw affordability increase this year.

That’s the broad-brush local finding in Attom Data Solution’s Q1 Housing Affordability Report. That report found that the average wage earner could not afford a median-priced home in 71% of the U.S. housing markets. That’s a big problem. The housing industry accounts for a little over 15% of the economy, and it’s difficult to have a vibrant economy without a vibrant housing market. Fortunately, the local economy hasn’t gone down the housing affordability rabbit hole, yet.

Although affordability – as measured by Attom’s Home Price Index (HPI) – in Sullivan has been below its historic level for four straight quarters. But the average wage earn can still afford a median-priced home. And average wage earners in Washington County, where it cost more to buy a home, can do the same.  Both counties – and the nine others in the area monitored by the Northeast Tennessee Association of Realtors (NETAR) Trends Report – have experienced strong sales and a healthy sales price growth for the past two years. But only Sullivan and Washington meet the benchmark to be included in Attom’s HPI study.

Buying in Sullivan County  

Attom’s data show the median home price in Sullivan for the first three months of this year was $125,000 – up 15% from Q1 last year. During the same period, the annualized weekly wage of $48,594 was up 6%. So, home prices are rising faster than wages. The silver lining to the economic cloud is the annual income needed to buy a median-priced home in Sullivan was $32,940. That price assumes a 3% down payment and a 28% front-end debt-to-income ratio.

Buying in Washington County

Washington County’s Q1 median home price was $1445,923, according to Attom. That’s 3% higher than Q1 last year. The annualized weekly wage was $41,977, which is 4% better than it was last year. So, the home-wages ratio is in a sweet spot – wages are increasing faster than home prices. The annualized income needed to buy one of those median-priced Washington County homes was $38,520 in Q1 assuming the 3% down payment and 28% front-end debt to income ratio.

Homes Take a Bigger Wage Bite in Washington Co.

It took 19% of the annualized Q1 wage in Sullivan County to buy a median-priced home. The historic percentage of wages to buy was 17.3%.

In Washington County, it took 25.7% of the Q1 annualized wage to buy. The historic percent of wages to buy for that county is 26.5%.

Both counties were most affordable in Q1 of 2013.

After all the number crunching and factoring in the tight inventory of homes for sale in both counties, the bottom line is accessibility is more of an issue than affordability.

The Affordability Big Picture

That’s a much better housing picture that what Attom’s report found on the national level. There were 335 counties where the median-priced home was not affordable for average wage earners in Q1. Those counties include some of the hottest – and most talk in the media – in the nation. At the same time, the median-priced home was still affordable for average wage earners in 138 counties.

“We are seeing a housing market in flux across the United States, with a mix of tailwinds and headwinds that are pricing many people out of the housing market, but also are creating potentially better conditions for buyers,” said Todd Teta, chief product officer at Attom. “Continually rising home prices in many areas do remain a financial stretch – or simply unaffordable – for a majority of households. However, quarterly wage gains have been outpacing prices increases for more than a year, and mortgage rates are falling, which have helped make homes a bit more affordable now than they’ve been in a year. Affordability may improve because of the simple fact that homes are out of reach for so many home seekers, suggesting that prices need to moderate up in order to attract buyers. Of course, a few quarters do not a long-term trend make. The economy could slow. The impact of last year’s tax cuts could fade, and interest rates could go back up, but the signs point to the possibility of an impending buyers’ market.”

Report Methodology

The ATTOM Data Solutions U.S. Home Affordability Index analyzes 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 473 U.S. counties with a combined population of more than 231 million. The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate mortgage and a 3 percent down payment, including property taxes, home insurance, and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments.

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 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. For instance, the nationwide median home price of $237,500 in the first quarter of 2019 would require an annual gross income of $66,336 for a buyer putting 3 percent down and not exceeding the recommended “front-end” debt-to-income ratio of 28 percent — meaning the buyer would not be spending more than 28 percent of his or her income on the house payment, including mortgage, property taxes, and insurance. That required income is higher than the $56,823 annual income earned by an average wage earner based on the most recent average weekly wage data available from the Bureau of Labor Statistics, making a median-priced home nationwide not affordable for an average wage earner.