Home Affordability Crashes as Prices Soar

Carrie Rossenfeld Residential & Mixed Use

Two Irvine, California–based research firms have found the it’s getting harder than ever for homebuyers to afford a home nationwide as sale prices continue to rise. According to CoreLogic, average home prices rose by 5 percent on a national basis between August 2017 and August 2018, and ATTOM Data Solutions reports that home affordability is at its lowest level in 10 years.

Part of what’s fueling the upward pressure on home prices is that more homeowners are waiting to sell because they’re hoping to increase their sale price in order to be able to afford a larger down payment on their next home, according to a statement from CoreLogic. The firm predicts home prices will increase nationwide 4.7 percent by August 2019.

Corelogic also reports that on a month-over-month basis — using the CoreLogic HPI Forecast, a projection of home prices calculated using the CoreLogic HPI and other economic variables — home prices are expected to have decreased by 0.4 percent from August to September 2018.

Dr. Frank Nothaft, chief economist for CoreLogic, is quoted in the release as saying, “The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home. The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index. National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.”

Daren Blomquist | Courtesy a representative of ATTOM Data Solutions

Meanwhile, ATTOM Data Solutions finds in its 2018 U.S. Home Affordability Report that U.S. home prices in the third quarter were at the least affordable level since Q3 2008 — a 10-year low. A release from the firm says that nationwide, the Q3 2018 home affordability index of 92 was down from an index of 95 in the previous quarter and an index of 102 in Q3 2017 to the lowest level since Q3 2008, when the index was 87.

The release also says that among 440 U.S. counties analyzed in the report, 344 (78 percent) posted a Q3 2018 affordability index below 100, meaning homes were less affordable than the long-term affordability averages for the county — the highest percentage of counties below historic affordability averages since Q3 2008.

Daren Blomquist, SVP at ATTOM Data Solutions, is quoted in the release as saying, “Rising mortgage rates have pushed home prices to the least affordable level we’ve seen in 10 years, both nationally and at the local level.”

Blomquist adds that close to one-third of the U.S. population now lives in counties where buying a median-priced home requires at least $100,000 in annual income, based on his firm’s analysis of 440 counties with a combined population of 220 million. “U.S. Census net migration data shows negative net migration in more than two-thirds of those highest-priced markets, while more than three-quarters of markets requiring annual income less than $100,000 to buy a home posted positive net migration, indicating that home affordability is at least one factor driving recent migration patterns.”

As SoCal Real Estate reported in June, low home affordability can have greatly deleterious effects on markets. Blomquist told us at that time, “Affordability challenges are a good problem to have in some ways, but there is a certain tipping point where affordability will basically cause a backlash in the local economy. At that point, you will start to see businesses potentially start moving out because it’s too expensive for their employees to live there, and employees will follow the jobs.”