These Are the Places People Can't Afford a House

The residential real estate market has exploded this year. Home prices nationwide have been up by as much as 15% from the same month last year, based on data from S&P/Case-Shiller. In some markets, that figure is more than 20%. One reason is the historically low interest rates. Another is that people have begun to relocate from expensive large cities like New York, Los Angeles and San Francisco to smaller cities with more affordable housing. One engine of these relocations is the ability to work from home. People no longer need to be near headquarters in the biggest cities.

One by-product of the increase in prices is that homes in some cities and counties are so high that they are no longer affordable for many people who want to own a residence in these areas. New research from ATTOM, the property data company, looks at counties where people are more or less likely to afford a home based on their incomes. The Home Affordability Report covers the third quarter of this year and analyzes 572 counties.

The report takes median home price data for a single-family home from publicly recorded sales deeds. Wage data comes from the U.S. Bureau of Labor Statistics. The formula for affordability assumed a 20% down payment and what ATTOM calls a “28 percent maximum ‘front-end’ debt-to-income ratio.” Affordability by county is based on this 28% number. A primary reason homes are increasingly less affordable nationwide is that home prices rose 18% in the third quarter to $315,500, when compared to the same quarter of last year. Todd Teta, chief product officer with ATTOM, commented:

With much still uncertain about how the pandemic and many other forces could still affect the economy, affordability remains a crucial measure of market stability that could easily keep going in the same direction or swing back the other way.

Some counties have such expensive homes that the costs are an extraordinarily high multiple of wages. The counties that require the greatest percentage of wages are Kings County, New York, at 78.7% of annualized weekly wages needed to buy a home; Santa Cruz County, California, (77.7%); Marin County, California, (75.1%): Maui County, Hawaii, (66.2%); Monterey County, California, (63.7%); Orange County, California, (57.9%); Queens County, New York, (56.0%); Nassau County, New York, (55.3%); and Alameda County, California, (54.3%).

Most of these counties are either in or near America’s largest cities.

Click here to see which are the most expensive cities in which to buy a home.