Until recently, homebuyers backed by low mortgage rates and rising wages were able to secure purchases on homes with inflated price tags, but as mortgage rates rise beyond 5% and wage growth slows to a halt for some, home affordability continues to deteriorate across the U.S., The Washington Post reports. The portion of wages required to buy a home grew at its fastest pace in over 15 years between the first quarter of 2021 and the first quarter of 2022, but the average household income isn’t rising quickly enough to offset higher home prices.
During the first quarter of 2022, the median priced home was less affordable than historical averages in 79% of all counties nationwide. The median national home price rose 16% year-over-year during the first quarter of 2022, while average wages rose by just 7% across the U.S.
Affordability is determined by Attom’s researchers as a comparison of the average income needed to pay for homeownership costs (including the mortgage payment, taxes and insurance) for a median-priced home for each county. The analysis assumes a 20 percent down payment and that the homeownership costs represent a maximum of 28 percent of the household income.
Until recently, low mortgage rates and rising wages were able to offset rising home prices, but with mortgage rates approaching 5 percent during the first quarter of the year, affordability was reduced.