The cost of buying a home in the U.S. rose starkly, according to a new analysis of housing affordability released Thursday by Attom Data Solutions. Homebuyers will need to dig deeper in their pockets than ever in many parts of the country to pay for their mortgage, property taxes, insurance and other homeownership costs.
Seventy-nine percent of U.S. counties were less affordable than their historic averages in first-quarter 2022 as home prices continue to rise faster than wages, the real estate data analytics company reported. That was up from a share of 38% of all counties in first-quarter 2021.
“Historically low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach 5% on a 30-year fixed-rate loan, more consumers are going to struggle to find a property they can comfortably afford,” Rick Sharga, Attom Data’s executive vice president of market intelligence, said in a news release.
The 2022 U.S. Affordability Report determines affordability for average wage earners by calculating the amount of income needed to meet monthly homeownership expenses. The report assumes a 20% downpayment and a 28% maximum debt-to-income ratio. Income needed to cover housing costs was calculated using weekly wage data from the U.S. Bureau of Labor Statistics.
Median home prices in 461 of the 586 counties analyzed in Q1 2022 were less affordable than their historic averages. Only 224 counties were less affordable as of Q1 2021.
The good news is that homes are still mostly affordable for the average U.S. worker. The analysis found that the average worker (with an annual wage of $66,560) would need to devote 26.3% of their income to pay for a home. Common lending standards set 28% as the ceiling for affordability.
But the 26.3% ratio required to buy a home was at its highest level since third-quarter 2008. This figure was up from 24.9% in fourth-quarter 2021 and from 21.8% in Q1 2021.
All of the top 25 counties with the highest annual wages required to buy a typical home were on the East or West coasts. These include New York County, New York ($329,747); and the California counties of San Mateo ($286,976); Santa Clara ($266,934); San Francisco ($264,038) and Marin ($250,106).
The counties with the lowest wages required buy a typical home were mainly in Pennsylvania: Schuylkill County, outside Allentown ($12,011); Cambria County, outside Pittsburgh ($17,129); Fayette County, outside Pittsburgh ($18,583) and Blair County, encompassing Altoona ($19,221); as well as Bibb County, Georgia ($18,027).