Local housing affordability drops to new lows

Washington and Sullivan counties’ housing affordability has dropped to record lows. Sullivan’s median home price payment is 50% higher than last year. It’s 35% higher in Washington Co, according to Attom Data Solutions.

Washington has the dubious distinction of having a housing market where the average working person can not qualify to buy a median-price home using conventional financing standards of a 20% down payment and a 28% front-end income-to-debt ratio. The typical buyer also must spend more than 30% of their income on housing. The Department of Housing and Urban Development defines 30% or less as the affordable housing benchmark.

Sullivan has not dropped to the same status as its neighbor to the south due to higher wages and home prices that are slightly lower. But its affordability index has declined for the past 15 quarters.

Affording a local home has gotten significantly tougher in recent months. Local markets gained recovery status from the Great Recession in 2016 and began on their current rage in 2018. Since sales have absorbed the region’s existing-home stock faster than the market replenished it. At the same time, the region’s new home industry was still operating at less than half of its 2006 peak capacity. That picked up after the nation’s largest builder – D.R. Horton – moved into the area. It now dominates the volume of new home permits.

At the end of May, a little more than one of every 10 homes in the Tri-Cities region was in the affordability range. Another 53% were above it and about 40% were priced below.

Higher prices and less inventory have also driven local rents to record highs.

Attom’s analysis found that single-family homes and condos are less affordable in 547 (97%) of the 575 counties nationwide with enough data to analyze.

“Extraordinarily low levels of homes for sale combined with strong demand have caused home prices to soar over the last few years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “But homes remained affordable due to historically low mortgage rates and rising wages. With interest rates almost doubling, homebuyers are faced with monthly mortgage payments between 40 and 50% higher than they were a year ago – payments that many prospective buyers simply can’t afford.”

The report determined affordability for average wage earners by calculating the income needed to meet major monthly homeownership expenses — including mortgage, property taxes, and insurance — on a median-priced single-family home, 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 Bureau of Labor Statistics

Down payment trends worsen the local payment and affordability picture. Attom says the typical down payment for a median-priced home in the Johnson City metro area was 8.4% in the first quarter. It was 5.2% in Kingsport-Bristol. Buyers who do not make a 20% or more down payment must buy private mortgage insurance (PMI). PMI  costs typically range from 0.5% to 1% of the total loan. The cost varies but can add hundreds of dollars a month to the mortgage.


During the second quarter, the typical mortgage payment for a median-priced home was $995, up 50% from last year. Buyers who did not make a 20% or more down payment were required to buy PMI, which increased their monthly payment.

The annualized weekly wages in Sullivan were $55,549, and the annual income needed to buy with a 20% down payment and a 28% front-end debt to income ratio was $42,634. So, the average working person could qualify to buy.

The percentage of income to buy was 21.5%.


During the second quarter, the typical mortgage payment for a median-priced home was $1,222, up 35% from last year. The annualized weekly wages for county workers were $48,516, and the wage needed to qualify to buy was $52,379; thus, the average worker could not qualify to buy a median-priced home.


Categories: REAL ESTATE

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