Home prices fell nationally, but affordability isn’t improving
ATTOM reported a 2% year-over-year decline in median home prices in Q3, but it wasn’t enough to counteract the effects of rising mortgage rates and inflation.
Even though home prices are coming down, nearly every U.S. market remains unaffordable, according to ATTOM's third quarter affordability report.
The newly released report estimates the national median home sales price was $368,000 in Q3, down 2% from $375,000 a year ago. With the rise in mortgage rates and inflation in recent months, however, median-priced homes were still considered unaffordable in 98% of U.S. counties. ATTOM defines affordability as a maximum 28% debt-to-income ratio based on average area wages and homeownership costs on a median-priced home with a 20% down payment.
"Affordability remained a challenge in the third quarter, even as some of the underlying factors moved in a favorable direction," said Rob Barber, CEO of ATTOM. "Home prices declined nationally and wage growth outpaced price growth in many counties, but those gains were not enough to meaningfully improve affordability across much of the country."
Where affordability is the worst and best: The report found that nearly a third (30.9%) of the U.S. counties studied were "seriously unaffordable," with a median-priced home consuming more than 43% of the typical resident's wages.
California, which has been facing a housing affordability crisis for several years, claimed 12 of the top 25 counties where homeownership expenses ate up the greatest share of income. Six other counties in the top 25 were in New York, three were in New Jersey and two were in Hawaii.
The five counties with the best affordability index were all in Texas, according to the report. Many Sun Belt metros saw a construction boom during the pandemic that left a glut of new homes, improving affordability compared to many other parts of the country.
Prices still rose in most counties: Even though the national median home price fell in the third quarter, prices rose in 64.3% of the 583 counties analyzed. Despite having a high share of affordable counties, many of the largest year-over-year increases were in Texas, while the biggest price declines were seen in Florida.