A growing swath of the U.S is unaffordable for people looking to buy a home, new data shows.
Between April and June, homeowners in 80% of 589 counties were spending more than 28% of their wages on housing costs, including mortgage payments, property taxes and homeowners insurance, according to a report from real estate analytics firm ATTOM. Home prices have hit record highs this year amid a shortage of affordable properties and mortgage rates hovering around 7%, more than twice their level in 2021.
Homeowners are typically advised to spend no more 28% of their wages on housing, and anything above that level is considered unaffordable. But ATTOM found that the average homeowner, with a typical annual income of $72,358, pays $2,114 a month for housing — that means about 35% of their pay goes to housing costs.
In more than a third of the markets ATTOM examined, homeowners were spending at least 43% of their wages on housing, a level the firm defines as “seriously unaffordable.”
“Among the 589 counties analyzed, 582, or 98.8%, were less affordable in the second quarter of 2024 than their historic affordability averages,” ATTOM said.
Housing costs rising faster than pay
Owning a home is consuming an ever larger chunk of household budgets in part because home prices and mortgage rates have outpaced wage growth.
“Housing costs have been outpacing incomes since the 1960s,” Chris Herbert, the managing editor for Harvard University’s Joint Center for Housing Studies told CBS News. “Why is that? Partly because of the fact that land, on which all homes sit, has been growing faster than incomes.”
For its analysis, ATTOM focused on counties with a population of at least 100,000 and at least 50 single-family home and condo sales in the second quarter of 2024.
The largest concentration of homeowners living in unaffordable areas are in Cook County, Illinois; Maricopa County, Arizona; San Diego County, California; and Orange County, California, according to ATTOM. By contrast, the counties with the highest concentration of affordable homes were Harris County, Texas; Wayne County, Michigan; Philadelphia County, Pennsylvania; Cuyahoga County, Ohio; and Allegheny County, Pennsylvania.
Across most of the U.S., the housing market has been tough sledding for both buyers and sellers this year. Many sellers, “locked in” to homes they bought at far lower mortgage rates, also remain hesitant to list their properties.
As of June, the national median home sale price hit a record $397,954, up from $383,000 from a year ago, according to online real estate brokerage Redfin. The average interest rate on a 30-year home loan is 6.95%, up from 6.81% a year ago, according to Freddie Mac.
Those figures “present a clear challenge for homebuyers,” ATTOM CEO Rob Barber said in a statement. “It’s common for these trends to intensify during the spring buying season when buyer demand increases. However, the trends this year are particularly challenging for house hunters, more so than at any point since the housing market boom began in 2012.”