Mortgage rates have risen recently, and so have home prices. This has begun to cause an “affordability” squeeze as people look for new places to live, often outside big cities that have been plagued by the COVID-19 pandemic. One way economists look at how much money people can afford to pay for a house is the percentage of a person’s income in ratio to their monthly home payments. These costs include mortgage, taxes, and insurance.
Real estate research firm ATTOM Data Solutions recently issued its first-quarter 2021 U.S. Home Affordability Report. In it they based their figures “on a median-priced home, assuming an 80 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio.” Income data, based on annualized weekly wages, came from the Bureau of Labor Statistics. ATTOM looked at 552 counties that had enough data for them to make accurate calculations. Among the things they discovered is that median home prices rose 18% across the country to $278,000 in the first quarter, compared to the same period a year ago. Home prices rose at least 10% in two-third of the country.
Commenting on the trends, Todd Teta, chief product officer with ATTOM Data Solutions, remarked:
“The past year certainly has been an odd one for the U.S. housing market. Home prices surged at a remarkable pace even as the virus pandemic damaged the U.S. economy, which dropped historical affordability levels. But average workers untarnished by the pandemic were still able to afford the typical home because wages and rock-bottom interest rates worked to their favor in a big way.”
Nationwide, the cost of homes purchased in the quarter took up 23.7% of wages, the data on the 552 counties showed.
The county where people spent the lowest percent of their wages on home costs was Schuylkill County, Pennsylvania, with 6.3% of annualized weekly wages needed to buy a home. Kings County (Brooklyn), New York, topped the other end of the list. Homebuyers needed 75.7% of annualized weekly wages to buy a home there.
Schuylkill County, Pennsylvania, is just west of Allentown. It has a population of 141,359. ATTOM does not trace a relationship between household income and housing affordability. However, counties where homes are least affordable, by ATTOM’s metrics, tend to have very high incomes. The median household income in Schuylkill County is very low, according to the Census Bureau. At $52,280, it is well below the national average. The poverty rate, at 11.7%, is above the national number.