ATTOM Data Solutions, curator of the nation’s premier property database and first property data provider of Data-as-a-Service (DaaS), today released its fourth-quarter 2020 U.S. Home Affordability Report, showing that median home prices of single-family homes and condos in the fourth quarter of 2020 were less affordable than historical averages in 55 percent of counties with enough data to analyze, up from 43 percent a year ago and 33 percent three years ago. Yet rising wages and falling mortgage rates still helped keep median home prices close to affordable for average wage earners across the country.
The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance — on a median-priced home, assuming a $100,000 loan and a 28 percent maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics (see full methodology below, which has changed from earlier reports to account for higher down payments and two-worker households).
Compared to historical levels, 275 of the 499 counties analyzed in the fourth quarter of 2020, or 55 percent, were less affordable than past averages, up from 217 of the same group of counties in the fourth quarter of 2019 and 164 in the fourth quarter of 2017. The fallback came as continued spikes in median home prices of at least 10 percent over the past year in most of the country outpaced the impact of increasing wages and declining mortgage rates to historic lows. Those price increases occurred as the U.S. housing market kept booming despite economic troubles related to the ongoing Coronavirus pandemic.
With prices rising faster than earnings, major home-ownership expenses consumed 29.6 percent of the average wage across the nation during the fourth quarter of 2020. That figure was up from 26.4 percent in the fourth quarter of 2019 and was above the 28 percent benchmark lenders prefer for how much homeowners should spend on those major expenses – mortgage payments, insurance and property taxes. Those costs exceeded the benchmark in 59 percent of the counties included in the fourth-quarter 2020 report.
“Owning a home in the United States slipped into the unaffordable zone for average workers across the nation in the fourth quarter as the numbers continued a year-long slide in the wrong direction. The latest housing market data shows the average worker unable to meet the 28 percent affordability guideline used by lenders,” said Todd Teta, chief product officer with ATTOM Data Solutions. “That’s happened as home prices have continued rising throughout 2020 and the housing market has remained remarkably resilient in the face of the brutal economic fallout from the Coronavirus pandemic. The future remains wholly uncertain and affordability could swing back into positive territory. But for now, things are going in the wrong direction for buyers.”
Among the 499 counties in the report, 203 (41 percent) had major home-ownership expenses on typical homes in the fourth quarter that were affordable for average local wage earners. The largest of those counties, based on the 28-percent guideline, were Cook County (Chicago), IL; Harris County (Houston), TX; Philadelphia County, PA; Hillsborough County (Tampa), FL and Cuyahoga County (Cleveland), OH.
The most populous of the 296 counties with unaffordable major expenses on median-priced homes for average earners in the fourth quarter of 2020 (53 percent of the counties analyzed) were Los Angeles County, CA; Maricopa County (Phoenix), AZ; San Diego County, CA; Orange County, (outside Los Angeles), CA, and Miami-Dade County, FL.
Home prices up at least 10 percent in more than three quarters of country
Median home prices in the fourth quarter of 2020 were up by at least 10 percent from the fourth quarter of 2019 in 395, or 79 percent, of the 499 counties included in the report. Counties were included if they had a population of at least 100,000 and at least 50 single-family home and condo sales in the fourth quarter of 2020.
Among the 41 counties with a population of at least 1 million, the biggest year-over-year gains in median prices during the fourth quarter of 2020 were in Cook County (Chicago), IL (up 32 percent); Philadelphia County, PA (up 22 percent); Fulton County (Atlanta), GA (up 22 percent); Travis County (Austin), TX (up 20 percent) and Contra Costa County, CA (outside San Francisco) (up 19 percent).
Counties with a population of at least 1 million that had the smallest increases (or price declines) in the fourth quarter were Middlesex County, MA (outside Boston) (down 9 percent); New York County (Manhattan), NY (down 3 percent); Fairfax County, VA (outside Washington, DC) (up 3 percent); Queens County, NY (up 8 percent) and Montgomery County, MD (outside Washington, DC) (up 8 percent).
Price appreciation up more than wage growth in over 90 percent of markets
Home price appreciation outpaced average weekly wage growth in the fourth quarter of 2020 in 460 of the 499 counties analyzed in the report (92 percent), with the largest counties including Los Angeles County, CA; Cook County (Chicago), IL; Harris County (Houston), TX; Maricopa County (Phoenix), AZ, and San Diego County, CA.
Average annualized wage growth outpaced home price appreciation in the fourth quarter of 2020 in only 39 of the 499 counties in the report (8 percent), including New York County (Manhattan), NY; Middlesex County, MA (outside Boston); Fairfax County, VA (outside Washington, DC); Honolulu County, HI, and Hidalgo County (McAllen), TX.
Average wages needed to afford median-priced home exceed $75,000 in a quarter of markets
Annual wages of more than $75,000 were needed in the fourth quarter of 2020 to afford the typical home in 124, or 25 percent, of the 499 markets in the report.
The highest annual wages required to afford the typical home were in San Mateo County (outside San Francisco), CA ($282,117); New York County (Manhattan), NY ($297,010); San Francisco County, CA ($277,757); Marin County (outside San Francisco), CA ($270,893) and Santa Clara County (San Jose), CA ($250,700).
The lowest annual wages required to afford a median-priced home in the fourth quarter of 2020 were in Bibb County (Macon), GA ($19,188); St. Lawrence County, NY (north of Syracuse) ($23,742); Trumbull County, OH (outside Youngstown) ($24,023); Calhoun County, AL (east of Birmingham) ($24,151) and Allen County (Lima), OH ($24,285).
Majority of housing markets less affordable than historic averages
Among the 499 counties analyzed in the report, 275 (55 percent) were less affordable in the fourth quarter of 2020 than their historic affordability averages, up from 43 percent of the same group of counties in the fourth quarter of 2019.
Counties with at least 1 million people that were less affordable than their historic averages (indexes below 100 are considered less affordable compared to their historic averages) included Dallas County, TX (index of 83); Travis County (Austin), TX (84); Tarrant County (Fort Worth), TX (85); Oakland County, MI (outside Detroit) (85) and Philadelphia County, PA (86).
Among counties with at least 1 million people, those where the affordability indexes declined the most from the fourth quarter of 2019 to the fourth quarter of 2020 were Cook County (Chicago), IL (index down 16 percent); Philadelphia County, PA (down 9 percent); Fulton County (Atlanta), GA (down 8 percent); Travis County (Austin), TX (down 7 percent) and Cuyahoga County (Cleveland), OH (down 7 percent).
Number of markets more affordable than historic averages declines
Among the 499 counties in the report, 224 (45 percent) were more affordable than their historic affordability averages in the fourth quarter of 2020, down from 57 percent in the fourth quarter of last year.
Counties with a population greater than 1 million that were more affordable than their historic averages (indexes of more than 100 are considered more affordable compared to their historic averages) include Middlesex County, MA (outside Boston) (index of 138); New York County (Manhattan), NY (130); Montgomery County, MD (outside Washington, D.C.) (121); Fairfax County, VA (outside Washington, D.C.) (117) and King County (Seattle), WA (107).
Counties with the best affordability indexes in the fourth quarter of 2020 were Richmond County (Staten Island), NY (index of 143); Bristol County, MA (outside Providence, RI) (142); Onslow County (Jacksonville), NC (141) and Middlesex County, MA (outside Boston) (138).
The largest improvements in affordability indexes from the fourth quarter of 2019 to the fourth quarter of 2020 were in Richmond County (Staten Island), NY (up 35 percent); Terrebonne Parish (Houma), LA (up 29 percent); Middlesex County, MA (outside Boston) (up 23 percent); Essex County, MA (outside Boston) (up 18 percent) and New York County (Manhattan), NY (up 17 percent).
Report Methodology
The ATTOM Data Solutions U.S. Home Affordability Index analyzes median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 499 U.S. counties with a combined population of 232.4 million. The affordability index is based on the percentage of average wages needed to pay for major expenses on a median-priced home with a 30-year fixed rate mortgage and a $100,000 loan. Those expenses include property taxes, home insurance, mortgage payments and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments.
The report determined affordability for average wage earners by calculating the amount of income needed for major home ownership expenses on a median-priced home, assuming a $100,000 loan and a 28 percent maximum “front-end” debt-to-income ratio. For instance, the nationwide median home price of $297,200 in the fourth quarter of 2020 required an annual gross income of $64,447, based on a $100,000 loan and monthly expenses not exceeding the 28 percent barrier — meaning households would not be spending more than 28 percent of their income on mortgage payments, property taxes and insurance. That required income is more than the $64,447 average wage nationwide based on the most recent average weekly wage data available from the Bureau of Labor Statistics, making a median-priced home nationwide unaffordable for an average household with two wage earners.
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