Housing affordability in the U.S. declined again in the spring as home prices surged nationwide, according to new data from real estate analytics firm ATTOM.
The findings show the price of a median single-family house surged to $350,000 in the second quarter, a 10% jump from the previous quarter, one of the biggest increases in the past decade.
That price is also 2% above last year’s peak, according to the report, before the spike in mortgage rates cooled demand among would-be homebuyers.
The portion of average wages required to own a home, meanwhile, skyrocketed to 33% in the period from April to June. That marks the highest debt-to-income ratio since 2007, meaning the market is the least affordable for Americans in nearly two decades.
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The lack of affordability is widespread across the country, with prices rising in about 98% of counties when compared to historical averages.
“The U.S. housing market has done an about-face following a downturn that threatened to usher in an extended period of flat or falling prices. With that has come another blow to how much house the average worker around the country can afford,” ATTOM CEO Rob Barber said in a statement. “Whether this is just a temporary blip amid this year’s peak buying season or a sign of another extended price surge is anyone’s guess.”
The Federal Reserve’s aggressive interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly two decades, and rates have been slow to retreat.
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Rates on the popular 30-year fixed mortgage are currently hovering around 6.71%, according to Freddie Mac, well above the 5.7% rate recorded one year ago and the pre-pandemic average of 3.9%.
Even though rates are nearly double what they were three years ago, home prices have hardly budged. That is at least in part due to a lack of available homes for sale.
Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.
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A recent report from Realtor.com showed that the number of available homes on the market in June was down more than 47% from the typical amount before the COVID-19 pandemic began in early 2020.
“Mortgage rates have hovered in the 6 [percent] to 7 percent range for over six months and, despite affordability headwinds, homebuyers have adjusted and driven new home sales to its highest level in more than a year,” Freddie Mac chief economist Sam Khater said recently.