The state of the housing market is less friendly to more consumers today than it was just one year ago.

In Q2 2017, buying an affordable home was possible in 66% markets; in Q2 2018, buying an affordable home was possible in 54% markets. That is a 12% drop in affordable markets in one year.

According to ATTOM Data Solutions Q2 2018 US Home Affordability Report recently released, 75% of local markets are not affordable for average wage earners. Seventy five percent! ATTOM says the housing market is now the least affordable it’s been since Q3 2008.  

ATTOM based its calculations on the percentage of income needed to by a median priced home. This Q2 2018, ATTOM’s Home Affordability Index HMI nationwide was 95. One year ago in Q2 2017, this HMI was 103. This year’s HMI sits at its lowest level since Q3 2008 when the number was 86.

The lowest HAI are located in

  • Flint – 70
  • Denver are – 72
  • Santa Fe – 73
  • Nashville area – 75

Among the 40 counties with a population of at least 1M, the lowest HAI are located in

  • Austin – 77
  • San Francisco/Oakland/Hayward – 81
  • Santa Clara (San Jose) – 82
  • Detroit – 82
  • San Francisco – 83

The highest share of income needed to buy a home during Q2 2018 was in the Bay Area and Brooklyn.

  • Marin County – 133.2%
  • Brooklyn – 123.1%
  • Santa Cruz – 100.3%
  • San Francisco – 97.2%

The lowest share of income needed to buy a home was in…

  • Detroit – 13.5%
  • Clayton County, GA – 13.7%
  • Quad Cities, IL – 15.8%
  • Saginaw, MI – 16.4%
  • Augusta – 16.4%

If this next statistic doesn’t raise your eyebrows, nothing will.

Since the market bottomed out in Q1 2012, median home prices nationwide have increased 75% while average weekly wages have increased 13% in the same time period.

Nationwide, the median home price was $245,000 in Q2 2018, an increase of 4.7% from one year ago. The annual growth in median home prices has outpaced average wage growth in 275 of 432 counties in the country.

The average wage earner wouldn’t qualify (based upon a 3% down payment and maximum front-end debt-to-income ratio of 28%) to buy a median priced home in 326 of 432 counties…that means the average wage earner wouldn’t qualify to buy a median priced home in 75% of the nation’s counties…that means a worker would be required to earn an annual gross income of $61,709 to qualify to buy a median priced home.

No wonder renting looks pretty good.  On the other hand, as inflation and demand for rental units increase, renting may become more like buying…less friendly.