If you’re in search of affordable housing and wish to allocate a reasonable portion of your income to your mortgage, have you considered relocating to Macon County, Illinois, nestled in the heart of the state’s farm country?
Alternatively, Schuylkill County, Pennsylvania, outside Allentown, could be a viable option.
| Highlights |
|---|
| 🏡 Housing Affordability Challenge Nationwide |
| 📊 Only 21% of Counties Meet Affordability Standard |
| 📈 Rising Mortgage Costs Outpace Wage Growth |
These counties, where the typical mortgage payment accounts for less than 15% of the average income, are among the dwindling areas in the United States where housing remains relatively affordable, as reported by property data company ATTOM.
Out of the 578 U.S. counties analyzed by Attom, only 21% met the affordability standard set by the real estate industry, which suggests that housing costs should not exceed 28% of household income.
Attom’s examination focused on counties with populations exceeding 100,000 and more than 50 home sales during the third quarter. In the majority of the country, housing expenses far surpass the affordability threshold, as illustrated in the map below.
Attom’s findings add to a growing body of discouraging data regarding housing affordability. According to data from the Federal Reserve Bank of Atlanta, typical earners would need to allocate a staggering 43.8% of their annual income to cover mortgage, insurance, and tax payments for a newly purchased home in August, the highest figure in home affordability data since 2006.
The National Association of Realtors’ affordability index has remained at its worst level since data collection began in 1989, as reported earlier this month.
In such an inhospitable market, how are individuals managing to become homeowners if they lack pre-existing property equity?
“The overwhelming majority of my first-time homebuyer clients are receiving assistance from their parents or other family members for the down payment. Lucky for them!” remarked Beatrice DeJong, a real estate broker in Los Angeles.
Indeed, these buyers are fortunate, as an annual income of $206,276 is required to afford payments on a median-priced home in Los Angeles County, while the median annual salary stands at just $79,456, according to Attom’s data.
The surge in mortgage rates since 2022 is the primary source of homebuyer difficulties, compounded by pandemic-induced surges in home prices that have yet to recede. The Federal Reserve’s monetary stimulus policies lowered average mortgage rates to under 3% in 2021, only for them to reverse course in 2022 as the Fed increased rates to combat inflation.
Freddie Mac reported that the average rate for a 30-year mortgage last week stood at 7.31%, the highest figure since December 2000. Coupled with higher prices, the average monthly payment for a home purchase reached $2,177 as of July, more than double the 2020 level, according to the National Association of Realtors.
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Home prices have surged by 45% since the onset of the pandemic and have remained elevated, as per the S&P CoreLogic Case-Shiller Home Price Index. Higher mortgage rates have adversely impacted housing demand, with many potential buyers exiting the market.
Additionally, they have hindered supply, as numerous would-be sellers are reluctant to relinquish the ultra-low rates secured during the pandemic. With supply and demand at an impasse, prices have yet to experience significant adjustments.
Rob Barber, CEO for ATTOM, expressed concern, stating, “The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices.
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With basic homeownership now soaking up more than a third of average pay, the stage is set for some potential buyers to be priced out, which would reduce demand and the upward pressure on prices.”
(Source: Attom Data)
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