The typical American cannot afford to buy a home in a growing number of communities across the nation, according to common lending standsards, and there’s no clear sign of conditions getting better soon.
That’s the takeaway from a new report released Thursday by real estate data provider ATTOM. Researchers at ATTOM examined the median home prices last year for roughly 575 U.S. counties and found that 99% of those counties now have homes priced too far out of reach for the average American who makes approximately $71,214 a year, according to the report.
Housing experts said a couple of trends explain why prices continue to climb. Interest rates on home loans grew past 7% this year, adding hundreds of dollars per month to a potential mortgage payment. Meanwhile, homeowners who locked in at lower mortgage rates during the pandemic have opted not to sell their home out of fear of having to buy another house at today’s elevated rates.
“The only people who are selling right now are people who really need to move because of a life event — divorce, marriage, new baby, new job, etc.,” Daryl Fairweather, chief economist of Redfin, told CBS MoneyWatch. “That lack of new inventory is keeping prices high.”
The national median existing home price was $407,100, up 3.9% from a year ago, according to the National Association of Realtors. The average interest rate on a 30-year home loan was 7.19%, up from 6.48% at the beginning of 2023, according to Freddie Mac. Prices will remain unaffordable as long as mortgage rates continue to rise, Fairweather said.
“The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices,” Barber said in a statement Thursday. “We will see how this shakes out as the peak 2023 buying season winds down.”
Nearly impossible for first-time buyers
ATTOM’s data adds to a growing body of real estate research in recent years, all of which conclude that it’s nearly impossible for house hunters to buy a property. It’s an especially tall task for younger millennial shoppers, one expert said.
“First-time home buyers, who are often the most sensitive to interest rates, have had to postpone their home-buying dreams,” said Dan Hnatkovskyy, co-founder of new home construction startup NewHomesMate, told CBS MoneyWatch. “Those older buyers with more cash on hand can buy down interest rates, or they can absorb a higher monthly payment and are still buying homes across the country.”
ATTOM defined “unaffordable” as someone who must devote more than 28% of their income toward paying for a particular home. Factoring in a mortgage payment, homeowners insurance and property taxes, the typical home priced today would require 35% of someone’s annual wages, ATTOM said.
Cities with the most unaffordable homes include Los Angeles, Chicago, Phoenix, San Diego and Orange County, California, ATTOM said. Communities surrounding Cleveland, Detroit, Houston, Philadelphia or Pittsburgh have the most affordable homes compared with median salaries for residents there, ATTOM said.
