Home > Mortgages > Housing Costs Are Rising Faster Than Incomes, Study Finds

Comments 0 Comments

Homes are unaffordable in more American cities than any time since the recession began, and housing costs are rising far faster than incomes, according to a study released Thursday by ATTOM Data Solutions.

During the third quarter of 2016, 24% of U.S. counties were less affordable than historic averages, up from 19% one year ago, the firm said; that’s the highest rate since the third quarter of 2009.

Ironically, affordability increased in the nations’s most-expensive areas, such as Northern Virginia and Brooklyn, N.Y. — probably because years of high price growth have finally started to level off, the report found.

The study uses an affordability index to measure whether homes for sale are more or less affordable relative to incomes. The index is based on the percentage of average wages needed to make monthly mortgage payments on a median-priced house with a 30-year fixed rate and a 3% down payment, including property taxes and insurance.

The report found that 101 of the 414 counties analyzed had an affordability index below 100. That means a median-priced home in that county was less affordable than the historic average for that county, as determined by ATTOM, the report said.

“The improving affordability trend we noted in our second quarter report reversed course in the third quarter as home price appreciation accelerated in the majority of markets and wage growth slowed in the majority of markets as well as nationwide, where average weekly wages declined in the first quarter of this year following 13 consecutive quarters with year-over-year increases,” Daren Blomquist, senior vice president at ATTOM Data Solutions, said in a press release. “This unhealthy combination resulted in worsening affordability in 63% of markets despite mortgage rates that are down 45 basis points from a year ago.”

The counties whose prices are less affordable than their historic averages include:

  • Harris County (Houston), Texas
  • Kings County (Brooklyn), New York
  • Dallas County, Texas
  • Bexar County (San Antonio), Texas
  • Alameda County, California, near San Francisco

Meanwhile, affordability improved in 153 counties (37%), including pricey spots like Marin County, California, in the San Francisco Bay Area and Arlington, Virginia (5%).

“Some silver lining in this report is that affordability actually improved in some of the highest-priced markets that have been bastions of bad affordability, mostly the result of annual home price appreciation slowing to low single-digit percentages in those markets” Blomquist continued. “This is an indication that home prices are finally responding to affordability constraints — a modicum of good news for prospective buyers who have been priced out of those high-priced markets.”

But that good news ends there. Any relief provided by improvement in household wages, as suggested by the recent Census report, was overwhelmed by housing price increases. “Annual growth in median home prices outpaced wage growth in 368 of the 414 counties (89%) included in the analysis,” the report said.

This is on trend: Since the beginning of 2012, median home prices nationwide have increased 60% while average weekly wages have risen just 6%, ATTOM said.

Buying a Home

Prospective homeowners may have little control over housing prices in their area, but a substantial down payment can help you save over the life of your mortgage. So can a good credit score, since it generally entitles borrowers to the lowest interest rates. (You can see where your credit stands by viewing your free credit report summary, updated every 14 days, on Credit.com.) If your credit needs to be polished, you can improve your scores by paying down high credit card balances, disputing any errors on your credit report and limiting new credit inquiries until your standing rises. You can also potentially cut back on the costs of a home by negotiating a good price. You can go here to learn more about how to do so.

Image: monkeybusinessimages

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team