Income growth hasn’t kept up with multi-year gains in home prices in 81% of U.S. real estate markets, according to a report by ATTOM Data Solutions’. The same report shows that the U.S. national affordability index in the Q4 2016 was at its lowest level since Q4 2008.
The specter of higher interest rates will likely exacerbate the affordability issue, according toDaren Blomquist, senior vice president at ATTOM Data Solutions. “The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year. Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets.”
Home price growth outpaced wage growth in 81 percent of counties
Annual home price growth outpaced annual wage growth in 363 of 447 counties (81%) analyzed in the report, up from 77% of counties in the previous quarter and up from 57% of counties a year ago.
Since bottoming out in Q1 2012, the national median home price has increased 60% while average weekly wages have increased just 1% during that same time frame.
The most populated counties where home price growth outpaced wage growth were:
- Los Angeles County, California;
- Harris County, Texas, in the Houston metro area;
- Maricopa County, Arizona in the Phoenix metro area;
- San Diego County, California;
- Orange County, California;
- Miami-Dade County, Florida;
- Kings County, New York; and
- Dallas County, Texas.
Affordability improves in 18 percent of markets compared to year ago
Home affordability improved compared to a year ago in 81 of the 447 counties analyzed (18%), down from 39% of counties with improving affordability in the previous quarter and down from 26% of counties with improving affordability in Q4 2015.
The most populated counties with improving home affordability in Q4 2016 compared to a year ago were:
- Suffolk County (Long Island), New York;
- Bronx County, New York;
- Fairfax County, Virginia in the Washington, D.C. metro area;
- Fulton County, Georgia in the Atlanta metro area; and
- Fairfield County, Connecticut.
Brooklyn, Santa Cruz, San Francisco top least affordable markets by share of wages
On average across the 447 counties analyzed, average wage earners need to spend 36.9% of their income to buy a median-priced home, still below the historic average of 39.1% but up from 36.6% in the previous quarter and up from 35.2% a year ago.
Counties that were least affordable by this absolute affordability standard were:
- Kings County (Brooklyn), New York (127.2% of average wages needed to buy a median priced home);
- Santa Cruz County, California (113.7%);
- Marin County (San Francisco), California (111.9%);
- Summit County (Summit Park), Utah (105.3%); and
- New York County (Manhattan), New York (102.6%).
Counties in New York, Dallas, San Francisco less affordable than their historic norms
Out of the 447 counties analyzed in the report, 130 counties (29%) had an affordability index below 100, indicating they are less affordable than their historic norms.
The most populated counties that were less affordable than their historic norms in Q4 2016 included:
- Kings County (Brooklyn), New York (affordability index of 91);
- Dallas County, Texas (91);
- Queens County, New York (95);
- Tarrant County, Texas, also in the Dallas metro area (93); and
- Alameda County, California, in the San Francisco metro area (93).