IRVINE, CA --(Marketwired - March 24, 2016) - RealtyTrac® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released its Q1 2016 Home Affordability Index, which shows that 9 percent of U.S. county housing markets were less affordable than their historically normal levels in Q1 2016, up from 2 percent of markets that exceeded historic home affordability levels a year ago.
The report analyzed median home prices derived from publicly recorded sales deed data collected by RealtyTrac and average wage data from the U.S. Bureau of Labor Statistics in 456 U.S. counties with a combined population of 221 million. The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment, including property taxes and insurance (see full methodology below).
Out of the 456 counties analyzed in the report, 43 counties (9 percent) had an affordability index below 100 in the first quarter of 2016, meaning buying a home was less affordable than the historically normal level for that county going back to the first quarter of 2005. That was up from 10 counties (2 percent of the 456 counties analyzed) exceeding historically normal home affordability levels in the first quarter of 2015.
At the peak of the housing bubble in Q2 2006, 454 of the 456 counties analyzed (more than 99 percent) were less affordable than their historic norms. In Q1 2012, when median home prices bottomed out nationally, only two counties out of the 456 analyzed (less than one-half percent) exceeded their historically normal affordability levels.
"While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets," said Daren Blomquist, senior vice president at RealtyTrac. "The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages."
Markets least affordable by historic standards
The top 20 county housing markets least affordable in the first quarter of 2016 compared to their historic affordability norms included counties in Denver; New York City; Omaha, Nebraska; Austin, Texas; Dallas; San Francisco; and St. Louis.
The five most-populated county housing markets less affordable than their historic norms were Kings County, New York (Brooklyn); Dallas County, Texas; New York County, New York (Manhattan); Alameda County, California in the San Francisco metro area; and Oakland County, Michigan in the Detroit metro area.
Markets most affordable by historic standards
The top 20 county housing markets most affordable in the first quarter of 2016 compared to their historic affordability norms included counties in Boston; Baltimore; Birmingham, Alabama; Providence, Rhode Island; and Chicago.
The five most-populated county housing markets still more affordable than their historic norms were Los Angeles County, California; Cook County, Illinois (Chicago); Harris County, Texas (Houston); Maricopa County, Arizona (Phoenix); and San Diego County, California (San Diego).
"Low interest rates are helping our affordability factor in South Florida," said Mike Pappas, CEO and president of the Keyes Company covering the Miami-Dade County market, where homes were still more affordable than their historic norms in the first quarter. "Even with the strong price rise over the past few years we are still below our historic norm! The timing is good for our aging millennials to buy now and lock in low rates."
National median home price requires 30 percent of average wage
Nationwide in the first quarter of 2016, the average wage earner needed to spend 30.2 percent of monthly wages to make monthly mortgage payments (including property taxes and insurance) on a median-priced home ($199,000), up from 26.4 percent of average wages needed to buy a median-priced home in the first quarter of 2015.
When home prices were most affordable nationwide in Q1 2012, the average wage earner needed to spend 22.2 percent of monthly wages to buy a median-priced home. When home prices were least affordable nationwide in Q2 2006, the average wage earner needed to spend 53.2 percent of monthly wages to buy a median priced home.
Markets least affordable by absolute standard
The top five least affordable counties based on percentage of average wages to buy a median priced home were Kings County, New York (Brooklyn) at 120.4 percent; Marin County, California in the San Francisco metro area at 109.2 percent; Santa Cruz County, California in the Santa Cruz metro area at 106.9 percent; New York County, New York (Manhattan) at 105.1 percent; and San Francisco County, California at 95.3 percent.
Markets most affordable by absolute standard
The top five most affordable counties based on percentage of average wages to buy a median priced home were Wayne County, Michigan (Detroit) at 8.5 percent; Baltimore County, Maryland at 9.2 percent; Clayton County, Georgia in the Atlanta metro area at 10.1 percent; Bay County, Michigan in the Bay City metro area at 11.5 percent; and Rock Island County, Illinois in the Davenport-Moline-Rock Island metro area at 12.3 percent.
Home price growth outpacing wage growth in 61 percent of markets
Annual change in median home prices in Q1 2016 outpaced annual change in average weekly wages in Q3 2015 (the most recent county-level wage data available from BLS) in 276 of the 456 counties analyzed for the report (61 percent).
The top five most-populated county housing markets where price growth outpaced wage growth were Los Angeles County, California (5 percent median home price growth and 3 percent average wage growth); Maricopa County, Arizona in the Phoenix metro area (8 percent median home price growth and 2 percent average wage growth); San Diego County, California (5 percent median home price growth and 4 percent average wage growth); and Orange County, California (5 percent median home price growth and 2 percent average wage growth).
Other markets where median home price growth outpaced average wage growth included counties in Miami, Brooklyn, Dallas, Seattle and Las Vegas.
"I'm sure it comes as no surprise to anyone in Seattle that it's getting harder and harder to afford a home," said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. "Thanks in part to strong income growth and intense competition, home prices continue to escalate at rates that are negatively impacting affordability. Something else pushing up prices is the Washington State Growth Management Act, which continues to limit developable land and is holding back many builders from adding much-needed inventory to the market."
Wage growth outpacing home price growth in 39 percent of markets
Conversely, annual change in average weekly wages outpaced annual change in median home prices in 180 of the 456 markets analyzed for the report (39 percent).
The top five most-populated county housing markets where average wage growth outpaced median home price growth were Harris County, Texas in the Houston metro area (where both wage growth and home price growth were virtually unchanged from a year ago); Queens County, New York; Wayne County, Michigan in the Detroit metro area; New York County, New York (Manhattan); and Middlesex County, Massachusetts in the Boston metro area.
Other markets where average wage growth outpaced median home price growth included counties in Cleveland, Minneapolis, Washington, D.C., Charlotte and Atlanta.
Report Methodology
The report analyzed median home prices derived from publicly recorded sales deed data collected by RealtyTrac and average wage data from the U.S. Bureau of Labor Statistics in 456 U.S. counties with a combined population of 221 million. The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment, including property taxes, home insurance and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments. Only counties with a population of at least 100,000 and sufficient home price and wage data quarterly back to Q1 2005 were used in the analysis.
About RealtyTrac
RealtyTrac is a leading provider of comprehensive U.S. housing and property data, including nationwide parcel-level records for more than 130 million U.S. properties. Detailed data attributes include property characteristics, tax assessor data, sales and mortgage deed records, distressed data, including default, foreclosure and auctions status, and Automated Valuation Models (AVMs). Sourced from RealtyTrac subsidiary Homefacts.com, the company's proprietary national neighborhood-level database includes more than 50 key local and neighborhood level dynamics for residential properties, providing unrivaled pre-diligence capabilities and a parcel risk database for portfolio analysis. RealtyTrac's data is widely viewed as the industry standard and, as such, is relied upon by real estate professionals and service providers, marketers and financial institutions, as well as the Federal Reserve, U.S. Treasury Department, HUD, state housing and banking departments, investment funds and tens of millions of consumers.
