Skyrocketing Home Prices And Mortgage Rates Leave Average Americans Struggling To Afford Ownership

Over the last two years, home ownership has become more difficult for people earning the average U.S. wage.

Median-priced single-family homes and condos were less affordable in the third quarter compared to historical averages in 99% of counties nationwide with enough data to analyze, according to the real estate data from ATTOM's 2023 U.S. Home Affordability Report.

An increase in home prices and home mortgage rates combined to push the typical portion of average wages required for home ownership expenses up to 35%, according to the report. That rate is considered unaffordable by lending standards, which call for a 28% debt-to-income ratio. It's also the highest level since 2007 and is well above the 21% figure from early 2021 just before mortgage rates started rising.

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"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," ATTOM CEO Rob Barber said. "We clearly aren't there yet, as the market keeps going up, and the slowdown we saw last year looks more and more like a temporary lull."

"But 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 upward pressure on prices. We will see how this shakes out as the peak 2023 buying season winds down."

Average 30-year home mortgage rates have risen from less than 3% in 2021 to more than 7% as home prices continue to increase. The nationwide median price of single-family homes and condos is up 2% from the second quarter to a record $351,250.

ATTOM determined affordability for average wage earners by calculating the amount of income needed to meet major monthly homeownership expenses, including mortgage payments, property taxes and insurance, on a median-priced single-family home assuming a 20% down payment and a 28% maximum debt-to-income ratio.

Counties with the largest populations that are unaffordable are Los Angeles County; Cook County, which includes Chicago; Maricopa County, which includes Phoenix; San Diego County; and Orange County outside of Los Angeles.

The most populous counties where major expenses on median priced homes are still affordable are Harris County, which includes Houston, Texas; Wayne County, which includes Detroit; Philadelphia County; Cuyahoga County, which includes Cleveland; and Allegheny County, which includes Pittsburgh.

The typical $2,053 cost of mortgage payments, homeowners insurance, mortgage insurance and property taxes nationwide exceeds $2,000 for the first time, now consuming 34.6% of the average national wage of $74,214. That's up 32.3% from the second quarter and 28.4% higher than the third quarter of last year.

"While lenders often push the 28% rule, especially if buyers have lots of financial resources outside of wages, we now are seeing full three-quarters of markets around the country pushing the basic lending benchmark," Barber said.

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