Home Prices Are Not Affordable For Average Wage Earners In 75 Percent Of U.S.

Published: Thursday, June 21, 2018 - 5:00am
Updated: Thursday, June 21, 2018 - 11:54am

The latest housing report says U.S. home prices are the least affordable they’ve been in almost ten years and prices are too high for average wage earners in most U.S. cities. Median home prices in the first quarter for Phoenix are up 10 percent over last year, now at $264,000, the highest median price since third quarter of 2008.

Matthew McKenney is a real-estate agent in Tempe, covering the southeast Valley. He said fewer people can qualify for a home loan, especially when wages are flat.

“It changes your payment by $113. When you are trying to qualify and the banks are using your ratios to qualify, that can put you out of qualifying, because you didn’t get the raise you were expecting and prices went up five percent,” McKenney said.

Home prices are also rising faster than wages in over half of U.S. cities, including Phoenix, according to the latest report from ATTOM Data Solutions.

Counties where an average wage earner could not afford to buy a median-priced home in second quarter 2018 included Los Angeles County, California; Cook County (Chicago), Illinois; Maricopa County (Phoenix), Arizona; San Diego County, California; and Orange County, California.

Nationwide, median home prices have increased 75 percent since the market low in 2012. Nationwide, second quarter 2018 home affordability index of 95 was down from an index of 102 in the previous quarter and an index of 103 in second quarter 2017 to the lowest level since third quarter 2008, when the index was 86. Median home prices are not affordable for average wage earners in 75 percent of local markets.

“Slowing home price appreciation in the second quarter was not enough to counteract an 11 percent increase in mortgage rates compared to a year ago, resulting in the worst home affordability we’ve seen in nearly 10 years,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Meanwhile home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates.”

An average wage earner would not qualify to buy a median-priced home in 326 of the 432 counties in the U.S. analyzed in the report based on a 3 percent down payment and a maximum front-end debt-to-income ratio of 28 percent.

EDITOR'S NOTE: This story has been modified to correct the spelling of Matthew McKenney's name.

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