Home Prices Still Outrunning Wages

Buying a house is out of reach for the average wage earner in counties encompassing more than half the U.S. population, according to a report released Thursday by a Los Angeles-area analytics company.

ATTOM Data Solutions found U.S. average wages rose 3% in the past year, while median housing prices rose 5%, putting homeownership out of reach of more Americans.

The U.S. median sales price of a home was $255,000 in the second quarter, and a buyer needed to be making at least $69,366 to buy the house with 3% down and a front-end debt-to-income ratio of 28%. However, the average worker was making just $57,278, which is $12,088 short of the minimum income to qualify.

The average wage earner would not qualify in 353 counties comprising 56% of the U.S. population.

Falling interest rates have lowered mortgage costs. The average 30-year mortgage carried a fixed rate of 4.07% in the second quarter, down from 4.59% a year ago. On a $255,000 house with 3% down, the first month’s interest payment falls from $946.11 at 4.59% to $838.93 at 4.07%. Over the life of the loan, the savings is 13%.

“Despite falling mortgage rates and rising wages, the cost of owning the typical home remains out of reach or a significant financial stretch for the nation’s average wage earners,” said Todd Teta, ATTOM’s chief product officer.

“However, a closer look at the data reveals milder-than-usual increases for the spring, and none as severe as in previous years since the recession,” Teta said. “The market may be easing, following similar indicators from recent home-flipping and foreclosure data trends.”

ATTOM surveyed 479 counties encompassing about 71% of the U.S. population. The report determined affordability of a median-priced home for average wage earners by calculating the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance.

It also found:

• Prices outpaced wage growth in 192 of the counties over the past year.
• In 45 counties, even a household with two average wage earners won’t qualify for a mortgage.
• The gap is greatest in the Census Bureau’s West region.

The average wage earner would qualify alone for a mortgage on a median-priced home in only one of the 96 Western counties surveyed: Cochise County in Arizona’s southeast corner, whose 126,516 residents include people living in Bisbee, Sierra Vista and Tombstone.

The Cochise County wage earner was making $45,526 a year in the second quarter, $104 above the threshold to buy a home with the area’s median price of $165,000.

The West has two counties where it would take four wage earners to qualify for buying a median-priced house: Marin and Santa Cruz counties in the San Francisco Bay area.

The only other county that takes four wage earners to buy a house is Kings County, N.Y., which has the same boundaries as Brooklyn.

On the other extreme, an average wage earner can qualify to buy two houses if they live in Wayne County in the Detroit area, Baltimore City, Md., or Bibb County, Ga., birthplace of The Allman Brothers Band, and 83 miles south of Atlanta by way of I-75 (or 93 rambling miles rolling down Highway 41).