By DON FENLEY

TRI-CITIES, Tenn. – Housing affordability and the overall local housing economy are opposing stories. The local median home price has flatlined in the $250,00 range. Compared to US levels, it’s affordable, and the market is relatively stable even with its inventory shortage and sales retreating to pre-pandemic levels.

But the dynamics that influence the housing economy continue working against every day, local residents. Interest rate hikes, and other forces including local homeowners’ pushback on higher-density development, continue pushing the typical cost of major ownership expenses up faster than wages and driving affordability lower.

Both the Federal Reserve’s Homeownership Monitor and ATTOM Data Solution’s Affordability Report show conditions declining. And concerns that the lack of workforce housing is getting close to the point where it could inhibit attracting workers to ease the local labor force shortage. Local governments are attempting to ease some of the shortage with in-fill housing opportunities, but some locals are pushing back. It’s a common refrain. Growth is welcome, just not in my backyard.

ATTOM’s third quarter report says home prices and home-mortgage rates have combined to help push the typical portion of average wages for major homeownership to 36 percent. The US level is 35 percent. Common lending standards are anything above a 28 percent debt-to-income ratio is unaffordable.

Sullivan Co. is not far behind. Its current level is 26 percent.

But both data sets are based on an assumption that isn’t the local norm. The assumption is based on a 20 percent down payment. ATTOM’s current loan origination analysis shows the average down payment in the Johnson City metro area is 9.5 percent. It’s 4.5 percent in Kingsport-Bristol. Since both are below the 20 percents standard, the loans require private mortgage insurance which adds hundreds of dollars to the monthly mortgage payment. The FED’s tracker details how much that additional cost is and its effect on the percentage of their income new buyers are spending on housing.

The latest portion tops the 28 percent lending guideline in 457, or more than three-quarters of the counties analyzed, assuming a 20 percent down payment. That is up from about two-thirds of the same group of counties a year ago and 44 percent two years ago.

“This pattern really jumps out,” Rob Barber, ATTOM CEO, said. “While lenders will often push the 28 percent rule, especially if buyers have lots of financial resources outside of wages, we now are seeing fully three-quarters of markets around the country pushing the basic lending benchmark.”

“The dynamics influencing the US housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices,” said Barber. “We clearly aren’t there yet, as the market keeps going up and the slowdown, we saw last year looks more and more like a temporary lull. But with basic homeownership now soaking up more than a third of average pay, the stage is set for some potential buyers to be priced out, which would reduce demand and the upward pressure on prices. We will see how this shakes out as the peak 2023 buying season winds down.”

It’s already shaking out in the local market and with little affordability improvement.

The FED’s Homeownership Affordability Tracker shows that Greene Co. owners are committing the lowest share of their gross income to housing at a level only slightly above 30 percent.

The 30 percent housing budgeting standard has been a rule of thumb since 1981, when government studies found those who spend more are “cost burdened.”

Buyers who accept more risk and willing to have a lower discretionary income often favor what’s called a traditional approach. It recommends buyers spend no more than 40 percent of their pretax income on housing.

Here’s the Atlanta FED breakdown for NE TN counties for home sales since the first of the year to July.

Carter – Mortgage, $1,689. Percent of income for housing 39.7 percent.

Greene – Mortgage – $1,589. Percent of income for housing 30.2 percent.

Hawkins — Mortgage – $1,663. Percent of income for housing 34.9 percent.

Sullivan – Mortgage – $1,700. Percent of income for housing 39.2 percent.

Unicoi – Mortgage – $1,668. Percent of income for housing 38.1 percent.

Washington – Mortgage – $2,149. Percent of income for housing 41.9 percent.

Categories: REAL ESTATE