IRVINE, CA — The American Dream of owning a home feels increasingly out of reach for wage earners in the United States. A recent study conducted by ATTOM reveals that in the first quarter of 2024, single-family homes and condominiums remain less affordable compared to historical averages in more than 95% of US counties analyzed. This trend continues a pattern, initiated back in 2022, of homeownership requiring a hefty percentage of wages.
Significant expenses associated with medium-priced homes consume approximately 32.3% of the national average wage in the first quarter of 2024, surpassing standard lending guidelines. While both figures highlight marginal quarterly improvements, they represent a decline compared to last year and remain at levels that have consistently disadvantaged home buyers for the past three years.
A combination of escalating home values and critical home-ownership costs have outstripped wage increases, despite some minor relief experienced in the latter part of last year leading into 2024’s first quarter. This dynamic has resulted in a spike in average wages needed for customary mortgage payments, property taxes, and insurance nationwide, which, compared to a year ago, has risen almost three percentage points and 11 points from the start of 2021, before mortgage rates began to spike from their lowest levels in decades.
Despite the challenging statistics, Rob Barber, CEO for ATTOM, offered some guarded optimism. “For sure, it’s not like things are coming up roses for house hunters. Affording a home remains a financial stretch, or a pipe dream, for many households. But […] it’s gotten a bit easier for average wage earners to afford a home so far this year. The upcoming Spring buying season will reveal a lot about whether home prices remain stable enough for this trend to continue.”
This mild optimism is fueled by a slowdown in the median national home price, which has risen less than 2% this quarter and is still below last year’s peak. Additionally, mortgage rates have dipped below 7% for a 30-year fixed loan after approaching 8% in 2023. Though lurking at around 4%, inflation is also less than half the levels experienced in 2021.
These joint factors have helped alleviate home ownership costs after a period when they surged faster than wages. However, with home ownership expenses in 577 of the 590 counties analyzed in the first quarter still less affordable than historically, there is much ground to cover. The affordability hurdle seems particularly high in highly populated counties, including Los Angeles County, CA; Maricopa County (Phoenix), AZ; San Diego County, CA; Orange County, CA, and Miami-Dade County, FL.
On a more positive note, the most populous of the 165 counties where major expenses are still manageable for the average local worker are Cook County (Chicago), IL; Harris County (Houston), TX; Wayne County (Detroit), MI; Philadelphia County, PA; and Oakland County, MI.
The ongoing imbalance between wage increases and home prices isn’t confined to these areas. Across the nation, the rise in home values is surpassing wage increases in over half the U.S market. If this trend continues, many may find the dream of home ownership slipping from their grasp. A situation that could have far-reaching implications for the housing market and the broader economy.
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