Local home buyers face worst affordability squeeze in 7 years

Home prices are increasing faster than wages. That and other market forces are driving affordability down and squeezing some buyers out of the market.

The housing market is going the wrong direction for some local home buyers.

According to the latest analysis, affordability conditions in Sullivan and Washington counties are at a 7-year low and similar conditions exist throughout the region.

The impotent affordability conditions contrast reports about strong sales, increasing prices, and record returns for sellers. That’s because balanced market conditions have gone out the window.

But local buyers looking for affordable homes are positioned better than those in many other markets. Housing affordability across the nation is at a 12-year low. Buyers needed to spend almost 30% of the average wage to afford a typical house. Anyone spending more than 30% on housing is classified as housing stressed.

ATTOM Data Solution’s Q4 Home Affordability Report found the median home prices of single-family homes and condos were less affordable than the historical averages in 55% of the U.S. counties with enough data to analyze. That’s up 43% from a year ago. “Yet, rising wages and falling mortgage rates still helped keep median prices close to affordable for average earners across the nation.”

“Owning a home in the United States slipped into the unaffordable zone for average workers across the nation in the fourth quarter as the numbers continued a year-long slide in the wrong direction. The latest housing market data shows the average worker unable to meet the 28 percent affordability guideline used by lenders,” said Todd Teta, chief product officer with ATTOM Data Solutions. “That’s happened as home prices have continued rising throughout 2020, and the housing market has remained remarkably resilient in the face of the brutal economic fallout from the Coronavirus pandemic. The future remains wholly uncertain, and affordability could swing back into positive territory. But for now, things are going in the wrong direction for buyers.”

The good, the bad, and the ugly

When market conditions are as unbalanced as they are now, it’s good for some, bad in others, and ugly for the overall market.

Although Sullivan Co. has been one of the hottest markets in the region for over a year it’s in more of a crunch than Washington Co. It has been below its historical affordability average for almost three years (11 quarters), while affordability has improved in Washington Co. for the past six quarters.

Why is a lack of balance in the market the ugly? Simply look at conditions as they now exist.

Double-digit home price increases

In the fourth quarter, U.S. median home prices were up at least 10% in 395 (79%) of the 499 counties included in ATTOM’s analysis.

  • The Sullivan Co. the year-to-date median price was 10.1% higher than during the first 11 months of last year.
  • The Washington Co. the year-to-date median was up 13.4%.

Price appreciation

Home price appreciation outpaced average weekly wage growth in 460 (92%) of the 499 counties in the study.

Home prices have also increased faster than wages in both Sullivan and Washington counties.

  • Sullivan Co.’s median sales price was up 15% in Q4 while the annualized wage increase was 4%.
  • In Washington Co. the median sales price appreciated 17% while wages increased by 4%.

Average wages need to afford a median-priced home

Nationwide, an annual wage of more than $75,000 was needed to afford the typical home in 124 (25%) of the study’s 499 markets.

Although wages have lagged home price increases, the local situation was the opposite.

An average wage earner in both counties had enough buying power to purchase a median-priced home. The percent of wages that went to that purchase varied. It was:

  • Sullivan Co. 17.3%.
  • Washington Co. – 22.9%.

How many listings are for affordable homes?

One of the biggest local affordability challenges is the number of homes on the market in the affordability range. They are available, but the selection and other buyer options are not as good as they used to be.

  • In Nov., 37% of the Sullivan Co. listings were at or below the median sales price of $154,000. The new listings picture wasn’t much better – 39% were in the affordability range.
  • Washington Co. was in a little better shape with 42% of the active listings at or below of $160,000 median sales price. But on 32.8% of the new listings were in the affordable range.

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Categories: REAL ESTATE

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  1. A median-priced home is more affordable than renting – if you can find one. - DON FENLEY @ CORE DATA