At the county level, one in four housing markets across the U.S. was less affordable during the first quarter of 2017 than they have averaged historically for the period, according to a report from ATTOM Data Solutions. The data represent the largest share of markets under the normal affordability index (100) in more than seven years.
In 53% of counties, wages grew faster than median home prices annually, the most to do so since home prices hit their trough in the first quarter of 2012. However, the five-year trend puts home-price growth ahead of income growth in a majority of counties and nationwide.
The average wage earner would need to spend more than 43% of their income on a mid-range home in 26% of the counties analyzed, mainly in Southern California, the San Francisco Bay Area, New York City and Washington, DC. Meanwhile, markets in Ohio, Michigan and Wisconsin scored high for affordability among average incomes.
The report jives with the latest S&P Core Logic Case–Shiller U.S. National Home Price Index, which recorded a 5.9% annual increase in home prices in January to put prices at their highest level in more than two years. Home prices continue to respond to tight inventory conditions, due in part to existing owners not trading up to new properties in order to free lower-priced inventory for new buyers as a slow pickup in new construction has created relatively few properties for the former group to choose among.
While the median price of homes in some counties relative to incomes there exceeds the threshold for housing affordability, the U.S. overall leads among the world's most affordable housing markets. According to the 2017 Demographia International Housing Affordability Survey, U.S. cities accounted for 82 of the top 99 most affordable markets of all sizes.
The ATTOM report and the Demographia survey point to a concentration of more affordable markets in the Midwest and Rust Belt regions, while markets along the country's coasts and in and around other major metros remain squeezed by high housing prices. The West Coast, in particular, is grappling with the lowest for-sale housing inventory.
Analysts are hopeful that strong market fundamentals will support continued demand. Recent reports showing gains in new-home sales and housing starts support such optimism, with sales rising 6.1% from January to February and housing starts climbing 3% for the period on the back of single-family construction.
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