Eighteen percent of U.S. county housing markets were less affordable than their historically normal levels in Q2 2016, up from 5 percent of markets in the previous quarter but down from 20 percent of markets exceeding historically normal home affordability levels a year ago. This data comes from a new RealtyTrac® Q2 2016 Home Affordability Index released this past week.
The affordability index was based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment — including property taxes and insurance.
Out of the 417 counties analyzed in the report, 74 counties (18 percent) had an affordability index below 100 in the second quarter of 2016, meaning buying a median-priced home was less affordable than the historically normal level for that county going back to the first quarter of 2005. That was up from 22 counties (5 percent) exceeding historically normal affordability levels in Q1 2016 but down from 82 counties (20 percent) exceeding historically normal affordability levels in Q2 2015.
“Although nearly one in five U.S. housing markets was not affordable by historic standards in the second quarter, the good news is that affordability is improving compared to a year ago in the majority of markets thanks to a combination of slowing home price appreciation and accelerating wage growth, along with falling interest rates,” says Daren Blomquist, senior vice president at RealtyTrac. “The average interest rate on a 30-year fixed rate mortgage is down 37 basis points from a year ago, while annual wage growth accelerated compared to a year ago in 72 percent of the markets we analyzed and annual home price growth slowed compared to a year ago in 68 percent of the markets, including bellwether markets such as Los Angeles County, Miami-Dade County, Brooklyn, Dallas County, and San Francisco County.
“For example in San Francisco County, annual home price appreciation slowed to 2 percent in the second quarter of 2016 compared to 21 percent in the second quarter of 2015 even while annual wage growth accelerated from 5 percent to 6 percent,” Blomquist adds. “Affordability constraints are beginning to rein in home price appreciation even while wage growth is gaining speed in an increasing number of markets.”
Wage growth outpaced price growth in 55 percent of counties
Annual wage growth outpaced annual home price growth in 228 of the 417 counties analyzed (55 percent), including Miami-Dade County, Fla.; Kings County, N.Y. (Brooklyn); Santa Clara County, Calif. in the San Jose metro area; Wayne County, Mich. in the Detroit metro area; and Bexar County, Texas in the San Antonio metro area.
Prior to Q2 2016, annual home price growth had outpaced annual wage growth in more than half of the 417 counties analyzed for 16 consecutive quarters going back to Q2 2012.
Annual home price growth still outpaced wage growth in 189 of the 417 counties (45 percent), including Los Angeles County, Calif.; Cook County, Ill. in the Chicago metro area; Harris County, Texas in the Houston metro …read more
From:: Real Estate News
