Home affordability falls to lowest levels in 10 years: report

Across the US, home prices are rising faster than wages in many cities

National /
Dec.December 20, 2018 07:00 AM

(Credit: iStock)

Home affordability has reached its lowest levels in a decade, and some experts are calling it the latest and among the most significant indicators of a cooling market.

Median U.S. home prices dropped in the fourth quarter to their lowest levels of affordability since the third quarter of 2008, according a report released Thursday by real estate data firm Attom Data Solutions.

Home prices are rising faster than wages in many U.S. cities, according to Attom and industry experts. Home affordability is considered a key metric in the overall health of the housing market.

Many large U.S. metro areas showed a significant decline in their affordability index levels from the previous year.

Los Angeles dropped 12 percent, one of the steepest declines. In New York, the affordability index level fell 8 percent, while in Miami-Dade County, it fell to 10 percent. Chicago’s Cook County also fell 10 percent.

Nationwide, the median home sales price from October through December was $241,250, up 9 percent from a year ago. Meanwhile, the average weekly wage was up 3 percent from a year ago.

Attom’s “affordability index” measures the percentage of income needed to buy a median-priced home compared to historic averages. An index rating of more than 100 indicates median home prices across the country are more affordable than their historic average.

In the fourth quarter, the home affordability index stands at 91, down from 106 at the same time last year.

Homebuilders are struggling with rising construction and supply costs, which are squeezing margins. These costs have made building a home more expensive.

Mortgage rates are also rising which experts say is also leading some potential homebuyers to get pushed out of the market.

In recent months, signs abound suggesting the years-long housing boom is coming to an end.

In October, the U.S. Commerce Department reported that new home sales dropped 8.9 percent compared to September, marking an almost two-and-a-half-year low. Home flipping also dropped to its lowest levels in more than three years, according to a third quarter report, also from Attom. The firm likened it to a “canary in the coal mine.”


Related Articles

arrow_forward_ios
(iStock)
South Florida resi construction starts soar in March
South Florida resi construction starts soar in March
Eden Multifamily heads Jay Massirman and Jay Jacobson with Cypress Equity Investments CEO Michael Sorochinsky (rendering courtesy of MSA Architects)
Eden Multifamily, Cypress Equity score $24M construction loan for Tamarac apartments
Eden Multifamily, Cypress Equity score $24M construction loan for Tamarac apartments
(iStock)
Home prices across globe hit records, prompting worries of bubble
Home prices across globe hit records, prompting worries of bubble
Steven and Beth Millner with One Thousand Ocean (Patrick McMullan/Getty, Google Maps)
Private equity honcho pays $5M for Boca Raton condo
Private equity honcho pays $5M for Boca Raton condo
PulteGroup's Brent Bake a rendering of the site in Avenir
Pulte buys site at Avenir in Palm Beach Gardens, plans 390-home development
Pulte buys site at Avenir in Palm Beach Gardens, plans 390-home development
Frank Mendez with Patricio Cordero (inset) and the property (Linkedin, Google Maps)
Pinecrest homeowners fight lien from celebrity builder they allege was running a kickback scheme
Pinecrest homeowners fight lien from celebrity builder they allege was running a kickback scheme
Donald R. Horton and a map of the development site (D.R. Horton)
D.R. Horton advances 211-unit townhouse project in Pembroke Pines
D.R. Horton advances 211-unit townhouse project in Pembroke Pines
Blink’s Michael Farkas and Lionstone’s Diego Lowenstein with 605 Lincoln Road (Google Maps)
Blink buys office condo on Miami Beach’s Lincoln Road for new HQ
Blink buys office condo on Miami Beach’s Lincoln Road for new HQ
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...