Although recent dips in interest rates have eased pressures, historically high home prices continue to make buying a home difficult for the average worker. This past third quarter, median-priced single-family homes and condos were less affordable when compared to historical averages in a whopping 99% of counties analyzed across the U.S., according to Attom’s third-quarter 2024 U.S. Home Affordability Report. Purchasing a home in this market requires a historically large slice of a paycheck, a trend that dates back to early 2022, as home prices continue to climb.
Major home expenses, including mortgage payments, property taxes and insurance, are a significant portion of affordability difficulties. These costs took up 33.5% of the average national wage in the third quarter of 2024, marking a slight improvement over the second quarter, but virtually unchanged year over year. This percentage is well above the standard 28% lending guideline, as well as being 12 points above the low point reached in early 2021, when mortgage rates were at their lowest levels in decades.
It’s readily apparent why affordability is a struggle, as the national median home price hit $365,000 in the third quarter of 2024, and mortgage rates, while down from highs of 7% or more, are still above 6%. But there are some positive signs for potential homeowners. While national median home prices continue to rise, the pace of that increase slowed in third-quarter 2024 compared to the previous quarter, resulting in a 3% decrease in major homeownership expenses. These small changes are helping push affordability in the right direction, although progress is slow.
With these changes, the portion of average local wages needed for major home expenses dropped in nearly 74% of the counties analyzed in the report. In the third quarter of 2024, the average cost of mortgage payments, homeowner insurance, mortgage insurance and property taxes nationwide was $2,045, a 3.3% decrease from the second quarter.
This consumes 33.5% of the average annual national wage ($73,164), which is roughly the same percentage as seen in third quarter of 2023 but is down from the 34.7% seen in second-quarter 2024. It still remains significantly high, however, and well above the low point of 21.3% seen in the first quarter of 2021. With the current average of homeownership major expenses, a homeowner would need to make an annual income of $87,640 to be considered affordable, which is 19.8% higher than the average national wage.
Although national averages paint an overall picture of the largest issues in the housing market, more localized data show where affordability is really straining the average worker. With 578 counties analyzed in the report, about 80% of them had major homeownership expenses that are considered unaffordable. In about one-third of the areas in the report, major expenses consume at least 43% of average local wages, which is considered seriously unaffordable.
When looking at the overall affordability picture, the index has improved slightly from second- to third-quarter 2024. Nationwide, the historical affordability index moved from 73 in the second quarter to 75 this past third quarter, taking the nationwide index out of its worst point in 17 years; indexes of less than 100 are considered historically less affordable. The counties with the largest improvement in their historical affordability index (with a population of at least 1 million) from second to third quarter are: Travis County (Austin), Texas (index up 18%); Palm Beach County (West Palm Beach), Florida (up 11%); Fulton County (Atlanta), Georgia (up 10%); Contra Costa County (outside Oakland), Calif. (up 10%); and Alameda County (Oakland), Calf. (up 10%).
Although home prices continue to increase across the country, there are still some hopeful signs for those aspiring to homeownership. Mortgage rates have been inching down, and recent moves by the Federal Reserve may continue this trend. If home price increases continue at a slower pace and wages continue to increase, shifts in the affordability index and greater access to homeownership may be on the horizon.
