Where can I afford to buy a house? How much house can I afford? In 2019, these are common questions among US homebuyers and real estate investors who are concerned about home affordability all across the nation. A new report from ATTOM Data solutions sheds some light on the answer.
Home Affordability Trends in the US Housing Market
ATTOM Data Solutions released its Q3 2019 US Home Affordability Report in which data shows that 74% (371 out of 498) of counties have a median property price which is unaffordable for the average wage earner.
Among the least affordable counties with the highest populations were:
- Los Angeles County, CA
- Cook County (Chicago), IL
- Maricopa County (Phoenix), AZ
- San Diego County, CAÂ
- Orange County, CA
Unsurprisingly, all 5 counties were listed as those with low housing affordability in Q2 2019.
Among the most affordable counties (127 or 26% of the counties studied in the report) were:
- Harris County (Houston), TX
- Wayne County (Detroit), MI
- Philadelphia County, PA
- Cuyahoga County (Cleveland), OH
- Allegheny County (Pittsburgh), PA
This data was found by comparing wage data from the Bureau of Labor Statistics to the income that would be needed to cover monthly payments such as mortgage payments, insurance, and property taxes on a median-priced property. The mortgage was assumed to come with a 3% down payment and a maximum debt-to-income ratio of 28%. You can read more about the data methodology here.
Todd Teta, Chief Product Officer with ATTOM Data Solutions, commented that buying a home is still difficult for the average wage earner, but says that there is one positive trend:
Buying a home continues to be a rough road to navigate for the average wage earner in the United States. Prices are going up substantially faster than earnings in 2019 without any immediate end in sight, which continues to make home ownership difficult or impossible for a majority of single-income households and even for many families with two incomes. If there is any silver lining to the picture, it’s that mortgage rates have fallen back to historic lows. That’s softening the blow of rising prices and actually making home ownership a bit more attainable in most areas of the country.
Other House Price Trends
The report also highlights a few other interesting trends when it comes to home prices vs wages:
In 76% (376 out of 498) of US real estate markets, home price appreciation outpaced average weekly wage growth. Among these counties were:
- Westchester County (New York), NY
- Los Angeles County, CA
- Suffolk County (Boston), MA
- Arlington County (Washington), VA
- Monterey County (Salinas), CA
Among the counties where home price appreciation was actually outpaced by annualized wage growth were:
- San Diego County, CA
- Orange County (Los Angeles), CA
- Miami-Dade County, FL
- Kings County (Brooklyn), NY
- Queens County, NY
In 67% (335 out of 498) of US real estate markets, a minimum of 30% of wages is needed to buy a house. The counties that require the highest percentage of wages include:
- Kings County (Brooklyn), NY (110.4%)
- Santa Cruz County, CA (105%)
- Marin County (San Francisco), CA (102.4%)
- Maui County, HI (87.9%)
- Monterey County, CA (87.5%)
Among the counties where the least was required were:
- Calhoun County (Battle Creek), MI (14.4%)
- Wayne County (Detroit), MI (14.9%)
- Clayton County (Atlanta), GA (15.2%)
- Rock Island County (Davenport), IL (15.5%)
- Montgomery County, AL (16.2%)
61% (304 out of 498) of US real estate markets were less affordable than their historic averages. Among these counties were:
- Los Angeles County, CA
- Harris County (Houston), TX
- Maricopa County (Phoenix), AZ
- Orange County, CA
- Miami-Dade County, FL
- Delaware County (Philadelphia), PA
- Lackawanna County (Scranton), PA
- Genesee County (Flint), MI
- Delaware County (Muncie), IN
- Saginaw County, MI
39% (194 out of 498) of US real estate markets were more affordable than their historic averages. Among them:
- Cook County (Chicago), IL
- San Diego County, CA
- Queens County, NY
- King County (Seattle), WA
- Santa Clara County (San Jose), CA
- Onslow County (Jacksonville), NC
- Clark County (Louisville, KY), IN
- Atlantic County (Atlantic City), NJ
- Cumberland County (Vineland), NJ
- Litchfield County (Torrington), CT
- Warren County (Stroudsburg), NJ
Housing Affordability for Real Estate Investors?
The report mainly focuses on homebuyers as the data looks at a mortgage with a 3% down payment. Real estate investors are typically required to pay a down payment of around 20%.
But what about affordable real estate investments? When it comes to home affordability trends, real estate investors who have the budget can take advantage of locations where housing is less affordable for the average wage earner. Typically, in these real estate markets, rental property demand is higher. To learn more about choosing where to invest in real estate based on housing affordability, investors should look at the price to rent ratio.
Still, if you wish to find a cheap investment property for sale that promises high rental income, use Mashvisor’s tools to easily identify opportunities anywhere in the US.
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