As we pointed out yesterday, the still-tight supply in the US housing market is helping drive home prices higher, creating a crisis of affordability that has placed homes financially out of the reach of many millennials. As we pointed out after yesterday’s existing home-sales slump, the reason for the drop in sales was a nearly 5% YOY climb in the median sales price of a home in the US. Today, ATTOM Data Solutions released its Q2 2018 housing affordability report, which determined that homes at at their least affordable level since Q3 2008.
Indeed, the affordability problem has worsened, even as the pace of home price gains has slowed, thanks to an 11% increase in mortgage rates compared with a year ago. “Meanwhile home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates.”
The median home price is currently $245,000, up 4.7% from a year ago, but representing a slowdown from the 7.4% pace of appreciation in the first quarter. Still, that’s well above the recent average weekly wage growth of 3.3%. Over a longer period of time, the trend is even more jarring: Prices have increased 75% nationwide since bottoming in 2012, while average weekly wages have only increased 13% during the same period.
Annual growth in median home prices outpaced average wage growth in 275 of the 432 counties, including some of America’s largest. The list includes Los Angeles County, California; Maricopa County, Arizona; San Diego County, California; Orange County, California; and Miami-Dade County, Florida.
Nationwide, an average wage earner would need to spend 31.2% pf their income to buy a median-priced home in Q2 2018. That’s above the historic average of 29.6%. Somebody earning the average wage wouldn’t qualify to buy a median-priced home in 326, roughly 75%, of the 432 counties analyzed in the report. ATTOM determined whether a home was affordable for the average wage earner by calculating the amount of income needed to make monthly mortgage payments, plus property taxes and insurance.
If millennials – particularly those living in expensive coastal cities – ever want to afford a home, they better pray that wage growth picks up remarkably. Otherwise, most will need to rely on help from parents if they ever want to afford a home. And if they don’t have parents capable of helping, well, they may never realize the American dream of home ownership.
via RSS https://ift.tt/2tgZcfM Tyler Durden