ATTOM’s Q2 2023 U.S. Home Affordability Report reveals that in 98% of counties analyzed, median-priced homes were less affordable in Q2 2023 compared to historical averages, continuing a trend since early 2022.
The report indicates that affordability has deteriorated nationwide in the current quarter, driven by a significant surge in home prices. As a result, the average portion of wages required for major home-ownership expenses has reached 33 percent.
The current portion, as per common lending standards that advocate for a 28 percent debt-to-income ratio, is deemed unaffordable. This figure represents the highest level since 2007 and is significantly higher than the 25 percent recorded in early 2022 when rising home mortgage rates started to impact ownership costs.
The worsening conditions for home buyers signify a significant shift in the U.S. housing market over the past year. This shift is characterized by a surge in median single-family home prices, reaching a new record after three consecutive quarters of decline. These declines were indicative of the conclusion of a decade-long period of growth that spanned from 2012 to mid-2022.
Across the country, the median value of single-family homes has experienced a notable 10 percent increase from the first to the second quarter of 2023, reaching $350,000. This surge in value represents one of the largest quarterly increases observed in the past decade. Compared to the previous peak reached a year ago before the market slowdown and price decline, the median value in the second quarter is 2 percent higher.
The recent price hikes during the Spring season have contributed to a rapid increase in the average expenses associated with home ownership, outpacing wage growth and leading to a decline in home affordability.
This continuous decline in affordability is occurring amidst various factors that are creating an uncertain situation, which could potentially impact the U.S. housing market in contrasting directions.
As home values have surged, mortgage rates have stabilized at below 7 percent after experiencing a significant increase last year. Additionally, the U.S. consumer-price inflation rate has decreased by over half, settling at around 4 percent. The recent gains in the stock market have further contributed to increased purchasing power for prospective home buyers. Consequently, this surge in buying power has pushed prices up, resulting in a decline in overall affordability.