Housing affordability worsened in Q3 2023 due to rising mortgage rates—which have now surpassed 7%—and high home prices, along with other economic challenges.
ATTOM’s Home Affordability Report for Q3 2023 found that median-priced single-family homes and condos are less affordable in the third quarter of 2023 compared to historical averages in 99 percent of counties around the nation with enough data to analyze.
Additionally, the report found that average wages nationwide required for major home-ownership expenses up to 35%. This is considered unaffordable by common lending standards, which call for a 28% debt-to-income ratio. It marks the highest level since 2007 and stands well above the 21% figure from early in 2021.
Key highlights:
- Amid the continued rebound in the U.S. housing market, annual price appreciation has outpaced weekly annualized wages in 272 of the 578 counties analyzed in the report (47%). That marked a significant change from last quarter when wages were growing faster annually than prices, or shrinking less, in three-quarters of the same counties.
- The current group where annual price gains are outpacing wage changes includes Cook County, Illinois; San Diego County, California; Orange County, California; Miami-Dade County, Florida, and King County, Washington.
- Year-over-year changes in average annualized wages have bested price movements in 306 of the 574 counties analyzed (53%). The latest group where wages are rising more annually, or declining less, than prices include Los Angeles County, California; Harris County, Texas; Maricopa County, Arizona; Kings County, New York, and Dallas County, Texas.
- The typical $2,053 cost of mortgage payments, homeowner insurance, mortgage insurance and property taxes nationwide exceeds $2,000 for the first time ever. It now consumes 34.6% of the average annual national wage of $71,214. That is up from 32.3% in Q2 2023 and 28.4% in Q3 2022, to the highest level since 2007.
- Counties with the largest annual increase in the portion of average local wages needed for major ownership expenses include Santa Cruz County, California (from 101.9% to 122.7%); Orange County, California (up from 73.8 percent to 94.6 percent); Monterey County, California (from 84.4% to 105.3%); Beaufort County, South Carolina (from 52% to 68%) and Santa Barbara County, California (from 69.6% to 84.9%).
- Among the 578 counties analyzed, 574 (99%) are less affordable than their historic affordability averages. That is higher than the 96% level of a year ago and well above 48% in Q3 2021. Historical indexes have worsened quarterly in 94% of those counties, pushing the nationwide index to its lowest point since 2007.
- Counties with the worst affordability indexes include Jackson County, Mississippi (49); Clayton County, Georgia (50); Muskegon County, Michigan (52); Lackawanna County, Pennsylvania (52) and Hernando County, Florida (53).
- Counties where major ownership costs require the largest percentage of wages are concentrated in the Northeast and on the West coast, where the top 20 are located. The leaders include Santa Cruz County, California (122.7%); Kings County, New York (109.9%); Monterey County, California (100.5%); Marin County, California (100.4%) and Maui County, Hawaii (97.3%).
- Among the 578 counties in the report, only four (1%) are more affordable than their historic averages. That is less than 4% a year ago and far below the 52% level in Q3 2021.
- Counties that are more affordable in the third quarter of this year compared to historical averages are Macon County, Illinois (110); San Francisco County, California (108); New York County, New York (101) and Caddo Parish, Louisiana (101).
Major takeaway:
“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,” said ATTOM CEO Rob Barber. “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 the upward pressure on prices. We will see how this shakes out as the peak 2023 buying season winds down.”
For the full report, click here.
