Housing Affordability Dropped In 77% Of US Counties

America’s home affordability problem was bad in 2020, before COVID-19 hit. In 2021, it got even worse.

In Q4 2021, median-priced single-family homes were less affordable in 77% of U.S. counties analyzed by ATTOM Data Solutions, a 13-year high, the company found.

In 440 out of the 575 counties analyzed, the gap between incomes and affordable home prices was larger than their historical averages. This is a dramatic increase from Q4 2020 when only 39% of counties were less affordable than in the past.

“The average wage earner can still afford the typical home across the United States, but the financial comfort zone continues shrinking as home prices keep soaring and mortgage rates tick upward,” said Todd Teta, chief product officer with ATTOM. 

Advocates for affordable housing say home and rental prices are reaching a crisis point. The National Low Income Housing Coalition very low-income households need an additional 6.8 million units in the market to meet their housing needs.

The good news for would-be homebuyers has been low mortgage interest rates.

“Historically low rates and rising wages are still big reasons why workers can meet or come very close to standard lending benchmarks in a majority of counties we analyze. But the portion of wages required for major ownership expenses nationwide is getting closer to levels where banks become less likely to offer home loans. Amid very uncertain times, with the pandemic again threatening the economy, we will keep watching this key measure of housing market stability.”

ATTOM attributed the 13-year record to wages not climbing fast enough to make up for skyrocketing home prices. The median national home price rose 17% in 2021 to a record $317,500. Median home prices were up at least 10% year-over-year in 64% of the counties analyzed. Home price appreciation outpaced wage growth in 78% of the counties.

Low inventory and soaring prices resulted in the average purchase loan size rising to $416,200 in December, the second-highest average amount on record.

While the market is cooling slightly, demand is expected to remain elevated in 2022. In a recent article for Forbes, Danielle Hale, a Chief Economist for Realtor.com, said that home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs.

Though homeownership costs are still within the financial means of average workers, affordability is inching up to a breaking point.

“The latest pattern – home prices still manageable but getting less affordable – has resulted in major ownership costs on the typical home consuming 25.2% of the average national wage of $65,546 in the fourth quarter of this year. That is up from 24.4% in the third quarter of 2021 and 21.5% in the fourth quarter of last year,” the report reads.

Households are considered cost-burdened when they spend 30% or more of their income on housing costs. ATTOM used a 28% standard preferred by lenders for how much income households spend on mortgage payments, home insurance, and property taxes.

ATTOM found that homeownership expenses were still affordable to average local wage earners in half of the counties analyzed, with the largest being Cook County, IL; Harris County, TX; Bexar County, TX; and Wayne County, MI.