Home Affordability in the U.S. Remains Challenging in Q3 2024

Homes across the United States remain largely unaffordable for the average worker, according to ATTOM Data’s latest U.S. Home Affordability Report for Q3 2024. The report reveals that single-family homes and condominiums in 99% of counties with sufficient data are still less affordable than historical averages. This affordability crisis, which began in early 2022, is driven by steadily rising home prices, which require a higher share of wages than in the past.

As of this quarter, major ownership expenses on median-priced homes consume 33.5% of the average national wage. While this percentage has slightly decreased from Q2 2024, it remains virtually unchanged from a year earlier and is still above the 28% recommended benchmark used by lenders.

Even with these marginal gains in affordability, homeownership remains financially challenging for many, as the national median home price stands at $365,000. Mortgage rates have decreased but remain above 6%, making it difficult for many to afford a home.

The report details that essential expenses—such as mortgage payments, property taxes, and insurance—continue to account for a significant portion of wages, around 12 percentage points higher than the levels seen in early 2021, when mortgage rates were at record lows.

Rob Barber, CEO of ATTOM, noted that the improvement in affordability was largely due to a slight reduction in interest rates. Although homeownership expenses are still above what lenders typically consider affordable, Barber acknowledged that the trend is moving in a positive direction. He also mentioned that the Federal Reserve's recent half-point interest rate cut could boost buyer prospects, though this could also drive up demand and prices given the tight housing supply.

This modest shift toward affordability comes amid a complex market. Rising home prices and property taxes continue to impact affordability, while the decline in mortgage rates during 2024 has helped alleviate some of these pressures. Additionally, the slower increase in the national median home price this quarter has resulted in a 3% drop in primary homeownership expenses as wages have grown.

ATTOM’s report assesses affordability by calculating the percentage of household income needed for ownership costs, which includes mortgage payments, property taxes, and insurance, assuming a 20% down payment and a 28% debt-to-income ratio. Compared to historical norms, 575 out of 578 counties analyzed in Q3 2024 are less affordable. Roughly 80% of these counties exceed the preferred 28% income threshold for ownership costs, with high-profile counties like Los Angeles, Cook (Chicago), and Maricopa (Phoenix) topping the list of unaffordable areas.

On the flip side, the largest counties deemed affordable include Harris County (Houston), Wayne County (Detroit), and Philadelphia County. The report also shows that home prices increased in 63% of counties from Q2 to Q3 2024, and were up annually in 85% of those areas.

Although home prices are still on the rise, wage growth has outpaced home price increases in certain regions. For example, counties like Maricopa (Phoenix) and Tarrant (Fort Worth) saw wages grow faster than home prices. However, in 71% of counties, home price growth continues to outpace wage increases.

The percentage of wages needed for homeownership declined on a quarterly basis in 74% of the counties analyzed, though it remained unchanged on an annual basis. Nationally, the percentage of wages required to cover homeownership costs dropped to 33.5% from 34.7% in the previous quarter, but this figure remains significantly higher than the 21.3% low observed in early 2021. The report found that in 78% of counties, homeownership still demands more than 28% of average wages, with some counties requiring as much as 43%, which is considered severely unaffordable.

In some of the most expensive areas, particularly along the Northeast and West Coasts, homeownership costs can exceed 100% of the average local wage, such as in Santa Cruz County, CA, and Brooklyn, NY. On the other end of the spectrum, counties like Cambria County, PA, and Montgomery County, AL, have some of the lowest homeownership costs.

Overall, while most areas in the U.S. remain historically unaffordable, there are signs of slight improvement, particularly in wealthier markets. As wages grow and mortgage rates fall, there is a slow but positive trend toward greater affordability.