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Homeownership Affordability Inches Upward But Remains Weak Throughout U.S.

ATTOM has released its Q1 2023 U.S. Home Affordability Report showing that median-priced single-family homes and condos are less affordable in Q1 of 2023 compared to historical averages in 94% of counties across the nation with enough data to analyze - far above the 62% of counties that were historically less affordable in Q1 of 2022.

The report also shows that homebuying conditions for house hunters may be improving as the portion of average wages nationwide required for typical major homeownership expenses has fallen slightly to 30% in Q1 of 2023.

The latest percentage is still considered unaffordable by common lending standards, which call for a 28% debt- to-income ratio. It also remains well above the 25% level in Q1 of 2022. But the portion has inched downward from 31% in the final months of last year.

The mixed picture facing homebuyers – prices that remain a financial stretch but are getting a bit more affordable – reflects a softening of the U.S. housing market combined with rising wages at a time when home-mortgage rates have stabilized following a year of increases.

The nationwide median single-family home and condo price is up less than 1% from Q4 of 2022 to Q1 of 2023 - now sitting at $320,000 - while three quarters of local markets continue to see prices slip this year. Those trends have followed an 8% decrease in the nationwide median during the second half of 2022. The drop-off has come as rising interest rates, high consumer-price inflation and stock market declines have cut into what home seekers can afford or the resources they have for down payments.

At the same time, wages have risen 6% nationwide over the past year, with increases continuing into the second half of 2022 in most of country.

"The soaring housing market has finally come back down in much of the U.S., at least for now, while worker pay is growing. That's produced some benefits for home seekers in the form of slightly better affordability, especially as lending rates have flattened out," said Rob Barber, chief executive office for ATTOM. "Things certainly haven't swung way back into friendly territory. Price drops and wage gains haven't yet translated into equal improvements in affordability. And the trend could go back the other way if interest rates go up again, as expected. But the scenario is becoming more favorable for buyers."

With multiple uncertain economic forces at work, the market could continue sliding or turn back upward this spring and summer. That, along with the path of wages, will dictate whether home ownership continues to grow more affordable after a gradual path the other way over the past few years.

ATTOM's latest report determined affordability for average wage earners by calculating the amount of income needed to meet major monthly home ownership expenses — including mortgage, property taxes and insurance — on a median-priced single-family home and condo, assuming a 20% downpayment and a 28% maximum "front-end" debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.

Compared to historical levels, median home prices in 537 of the 572 counties analyzed in Q1 of 2023 are less affordable than in the past. The latest number is down from 565 of the same group of counties in Q4 of 2022. But it remains far more than 356 in Q1 of 2022 and just 91, or less than one-fifth, that were less affordable historically two years ago.

Meanwhile, major home-ownership expenses on typical homes are considered unaffordable to average local wage earners during Q1 of 2023 in 373, or about two-thirds, of the 572 counties in the report, based on the 28% guideline. Counties with the largest populations that are unaffordable in the first quarter are Los Angeles County, CAMaricopa County (Phoenix), AZ; San Diego County, CAOrange County, CA (outside Los Angeles) and Kings County (Brooklyn), NY.

The most populous of the 199 counties where major expenses on median-priced homes remain affordable for average local workers in Q1 of 2023 are Cook County (Chicago), IL; Harris County (Houston), TX; Wayne County (Detroit), MI; Philadelphia County, PA, and Franklin County (Columbus), OH.

To read the full report, including more data, charts and methodology, click here.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport magazines with more than eight years of writing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is an avid jazz lover and likes to read. She can be reached at [email protected].

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