Here's Where Buying a Home Won't Eat Up Your Whole Paycheck
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The Detroit area is where homes are most affordable as compared with average local wages and Brooklyn, New York, is the least affordable, according to one real estate report.
Single-family homes and condos are less affordable than they were in the second quarter of 2020, as home prices increase faster than wages, according to the U.S. Home Affordability Report.
The latest home affordability analysis conducted by Attom, a real estate website, shows that prices are "still manageable but getting less affordable" across the country. The typical home cost was about 25% of the average national wage of $64,000 in the second quarter, compared with 23% in the first quarter and 22% in the second quarter of 2020. However, the percentage still is lower than the 28% lenders prefer homeowners not go over on mortgage payments, home insurance and property taxes.
Attom determined affordability for average wage earners by calculating the amount of income needed to meet monthly home ownership expenses—mortgage, property taxes and insurance—for a median-priced home, assuming a 20% down payment and a 28% maximum front-end debt-to-income ratio. The firm used average weekly wage data from the U.S. Bureau of Labor Statistics.
The second-quarter 2021report shows that ownership costs for median-priced homes are less than 28% of average local wages in 57% of U.S. counties analyzed. It says that among the 43 counties studied with a population of at least 1 million, the top five areas where homeowners paid less than 28% of average wages were:
- Wayne County (Detroit), Michigan (10.7%)
- Cuyahoga County (Cleveland), Ohio (12.9%)
- Philadelphia County (Philadelphia), Pennsylvania (18.1%)
- Harris County (Houston), Texas (20.2%)
- Franklin County (Columbus), Ohio (21%)
The report also shows that among counties with populations of at least 1 million, homeowners with the highest payment rates in relationship to wages are in: Kings County (Brooklyn), New York (100.8%); Queens County (Queens), New York (68.7%); Nassau County, New York, near Manhattan (63%); Orange County, California, near Los Angeles (59.2%); and Alameda County (Oakland), California (54%).
Covid-19 has impeded middle-income earners' ability to find affordable homes, with frontline workers facing the most issues, according to an Urban Land Institute report.
The ULI study identified gaps in home attainability across the U.S., and highlights occupations that have been most affected because of the Covid-19 pandemic. According to the organization, the occupations fell into three broad categories that could face heightened home-affordability risks: health care workers, frontline workers and workers with an elevated risk of income disruption.
The national median existing home price for all housing types in May was $350,300, up 23.6% from May 2020 ($283,500), according to the National Association of Realtors. This is a record high and marks 111 straight months of year-over-year gains since March 2012, NAR says.
For more information from the Attom report click here.
Jean Dimeo is managing editor for Route Fifty.
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