An affordability index produced by Attom Data Solutions is hovering at or near 2008 lows but also reflecting wage growth in excess of home prices in many areas.
The index, which measures the current average share of wages needed to buy a median-priced home relative to the historic average, fell to 103 in the first quarter of 2017. That represents a decline from 119 in the first quarter of 2016 and shows affordability nationally is above the historic average indicated by 100 on the index by a slim margin.
Affordability was last this low in the fourth quarter of 2008. An early index reading of 103 for the fourth quarter of 2016 initially was thought to have matched that low, but it was later revised upward to 108.
Affordability was below historic averages for a long stretch prior to 4Q 2008. Whether affordability will fall to those levels again may depend on how strong wage growth is.
"Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates," said Daren Blomquist, senior vice president at Irvine, Calif.-based Attom, in a press release.
"Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since 1Q 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend."
On an annual basis, wage growth has outpaced annual growth in median home prices in 199 of 379 counties. At 53%, this marks the highest percentage of counties in this category since home prices were at a post-crisis low in the first quarter of 2012.
Despite strong wage growth, borrowers in 26% of counties could face some financing hurdles.
Consumers with average earnings in 97 of 379 counties would need to spend more than 43% of their income to buy a median-priced house, which puts them above the threshold lenders needed for a Qualified Mortgage safe harbor from certain regulatory requirements. But there are exemptions from QM rules in government-related mortgage markets, and some lenders may be willing to make non-QM loans.