Nationwide home affordability declined again in the second quarter of the year as rising prices pushed up the wages necessary to afford a home, according to a new report.
Major homeownership expenses last quarter now require about 33 percent of a family’s monthly income, the report from nationwide property data provider ATTOM showed.
Homes were less affordable in 98 percent of counties with data to analyze when compared to historical averages. This marks the highest debt-to-income ratio since 2007.
Buyers needed to earn $75,000 annually to afford the typical home in half of the markets ATTOM analyzed.
After three quarters of declines, the median single-family home value rose 10 percent from the first quarter to $350,000 — the largest increase in more than a decade, the company found.
“The U.S. housing market has done an about-face following a downturn that threatened to usher in an extended period of flat or falling prices. With that has come another blow to how much house the average worker around the country can afford,” ATTOM CEO Rob Barber said in a statement.
“Whether this is just a temporary blip amid this year’s peak buying season or a sign of another extended price surge is anyone’s guess,” Barber continued. “But any predictions of a market demise were certainly premature, and house hunters are feeling the pinch.”
Home prices fell in the back half of 2022 amid the Federal Reserve’s fight with inflation that pushed up mortgage rates to more than 7 percent in November.
Mortgage rates have since moderated but settled for the last few months above 6 percent.
Last week, the average 30-year fixed rate moved up slightly to 6.71 percent, according to Freddie Mac.
“Mortgage rates have hovered in the 6 [percent] to 7 percent range for over six months and, despite affordability headwinds, homebuyers have adjusted and driven new home sales to its highest level in more than a year,” Freddie Mac Chief Economist Sam Khater said last week.
New home sales surged by 12.2 percent in May to a seasonally adjusted annual rate of 763,000 units. Sales were 20 percent higher than they were a year ago.
“New home sales have rebounded more robustly than the resale market due to a marginally greater supply of new construction,” Khater continued. “The improved demand has led to a firming of prices, which have now increased for several months in a row.”