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Homeownership is becoming increasingly difficult to achieve — and a new report shows that relief isn’t coming any time soon.
Across 74% of counties nationwide, average wage earners could not afford to buy a median-priced home as of the third quarter of 2019, according to a report released Thursday by property-data firm Attom Data Solutions. That’s up from six months ago, when 71% of housing markets were unaffordable for average workers.
Attom calculated affordability by determining the amount of income needed to make monthly house payment, such as mortgage, property taxes and insurance premiums. The analysis assumed the homeowner in question only put 3% down when they purchased the property. Attom compared that amount to the average weekly wage data from the Bureau of Labor Statistics.
There were only 127 counties out of the nearly 500 that Attom analyzed where a person who earned the average salary could afford to make the housing payments for a median-priced home in their area. Among the parts of the country where this was true were Houston, Detroit, Philadelphia and Cleveland.
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And matters are only getting worse. Home-price appreciation has outstripped wage growth across 76% of the markets Attom studied, particularly in the areas near major cities such as New York, Los Angeles, Boston and Washington, D.C.
“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,” Todd Teta, chief product officer with Attom Data Solutions, said in the report.
The major factor driving home prices higher as of late for most of the country has been the lack of homes for sale. After the recession, home-building activity was slow to rebound and mostly concentrated in the most expensive tier of the market for single-family homes.
As newer homes didn’t come on line to meet the growing demand, particularly for cheaper starter homes, competition for properties heated up, and bidding wars pushed home prices even high across much of the country.
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In recent weeks, the downturn in mortgage rates provided some reprieve for home buyers, Teta said, as it relieved some of the affordability constraints. Housing activity — both in terms of salesand construction — has rebounded as a result.
However, the reprieve could be short lived, as interest rates have inched upward again. Ultimately, until there is a major resurgence of home building, it’s going to be difficult for many people to afford to buy their own homes.
“The reality is that you can’t buy what’s not for sale and, however low they may go, lower mortgage-interest rates can’t right the supply side of the market,” Richard Moody, chief economist at Regions Financial Corp. wrote in a research note last week.