Housing Affordability Declines As Median Home Prices Spike 10%

Housing affordability across the nation has worsened during the second quarter as a jump in home prices pushes the portion of wages required for homeownership up to 33%, according to a report from real estate data analytics firm ATTOM.

That's a ratio that's considered unaffordable by common lending standards, which require a 28% debt-to-income ratio. It's also the highest level since 2007 and is well above the 25% figure from early 2022, according to ATTOM's second-quarter 2023 U.S. Home Affordability Report.

"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," ATTOM CEO Rob Barber said. "With that has come another blow to how much house the average worker around the country can afford."

It's the second shift in the U.S. housing market in the past year, as the median price for a single-family home nationwide has shot up 10% to $350,000 from the first to the second quarter this year — one of the biggest quarterly increases in the past decade. The second-quarter median price is 2% higher than the previous peak hit a year ago before the market stalled and prices dropped.

"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 said. "But any predictions of a market demise were certainly premature — and house hunters are feeling the pinch." 

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Home values have spiked as mortgage rates have settled below 7% after more than doubling last year and the U.S. consumer-price inflation rate has dropped by more than half to about 4%. The stock market also has shown recent gains.

ATTOM determined affordability for average wage earners by calculating the amount of income needed to pay monthly homeownership expenses, including mortgage payments, property taxes and insurance, on a median-priced, single-family home with a 20% down payment and a 28% debt-to-income ratio. That was compared to annualized average weekly data from the Bureau of Labor Statistics.

Median home prices in 565 of the 574 counties ATTOM analyzed in the second quarter are less affordable in the past, up from 555 in the same group of counties in the first quarter and from 553 in the second quarter of last year. It's more than double the number that was less affordable two years ago before home mortgage rates started rising.

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