Despite 'rock bottom rates' home affordability slips in 3Q: Attom

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About 63% of U.S. counties analyzed by Attom Data Solutions had median home prices that were less affordable than their historical averages in the third quarter. That's up from 54% of those same jurisdictions one year ago.

"In a year when nothing is normal, owning a single-family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the opposite way," Todd Teta, Attom's chief product officer, said in a press release. "Wages are up and mortgage rates are down to rock-bottom levels, which should work in favor of homebuyers."

"On top of that, the American economy has suffered greatly since the coronavirus pandemic began surging over the winter, a plight that normally would drop home demand and home prices," he continued. "But those same low mortgage rates, along with other factors, have led a lot of buyers into the market chasing a reduced supply of homes. The result is price hikes have raced past the impact of wages and mortgage rates."

In the second quarter, a period when the coronavirus had a dramatic impact on home sales activity, 51% of the counties Attom analyzed were less affordable than their historic average.

Attom calculated affordability by measuring the amount of income needed to make monthly house payments, including taxes and insurance, on a median-priced home. The calculation assumes the applicant is able to put 20% down on the property and has a 28% maximum front-end debt-to-income ratio, which is measured as the borrower's housing expense divided by gross income.

Using those measurements, 308 of the 487 counties analyzed in the third quarter are now less affordable compared with historic median home prices in those areas, up from 262 of the same group of counties one year prior.

The counties with a population of at least 1 million people that had the largest year-over-year decline in affordability in the third quarter are Philadelphia County, Pa., with an index value down 10%; Franklin County, Ohio, which includes Columbus, down 8%; Contra Costa County, Calif., outside San Francisco, down 6%; Dallas County, Texas, down 6%; and Broward County, including Fort Lauderdale, Fla., down 6%.

Some of the largest affordability gains were seen in all five boroughs of New York City, which are individual counties.

Staten Island, which is Richmond County, was second in the nation overall, with its affordability index up 24%. That was behind the 50% increase in Luzerne County, Pa., which includes Wilkes-Barre.

The other four boroughs topped the list of counties with populations over 1 million with the largest gain: Kings County (Brooklyn), up 17%; Queens County, up 8%; New York County (Manhattan), up 7%; and Bronx County, up 4%.

However, that gain in affordability is relative, as a report from StreetEasy, a subsidiary of Zillow, found. During August, home prices in Manhattan fell 4.5% from one year prior to just under $1.4 million, its lowest level since July 2014.

In Brooklyn and Queens, prices were flat at $959,900 and $660,000, respectively, although both include neighborhoods where prices rose.

Pending sales in Brooklyn were up 38.7% from last year, with 735 homes going into contract, while in Manhattan they fell by 6% and Queens by 4.3%

"The striking surge in new deals in Brooklyn is the one of the first optimistic indicators for the city's sales market, and suggests that contrary to popular belief, many are making the commitment to live in the city for the long term," StreetEasy economist Nancy Wu said in a press release. "Manhattan has been much slower to bounce back — which indicates that buyers looking to take advantage of the low mortgage rates and stay in the city are prioritizing space and affordability over living close to their offices."

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Housing affordability Purchase Mortgage rates Attom Data Solutions Home prices Housing inventory Zillow Coronavirus
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