MReport July 2022

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54 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Rising Rates Make Homeownership Unaffordable in Most of U.S. Homeownership expenses on typical homes are now unaffordable to average local wage earners in 67% of the counties analyzed in ATTOM's Q2 U.S. Home Affordability Report. A TTOM has released its Q2 2022 U.S. Home Affordability Report, showing that median- priced single-family homes and condos are less affordable in Q2 of 2022 compared to histori- cal averages in 97% of counties across the nation with enough data to analyze. That was up from 69% of counties that were historically less affordable in Q2 of 2021, to the highest point since 2007, just before the housing market crashed during the Great Recession of the late 2000s. The report also shows that the portion of average wages nation- wide required for major home- ownership expenses has risen this quarter to 31.5% as the median price of a single-family home has hit a new high of $349,000 and 30-year mortgage rates have shot up above 5%. The percentage of average wages consumed by those expenses has risen at the fastest quarterly and annual pace since at least 2000. "Extraordinarily low levels of homes for sale combined with strong demand have caused home prices to soar over the last few years," said Rick Sharga, EVP of Market Intelligence at ATTOM. "But homes remained relatively affordable due to historically low mortgage rates and rising wages. With interest rates almost dou- bling, homebuyers are faced with monthly mortgage payments that are between 40 and 50% higher than they were a year ago—pay- ments that many prospective buyers simply can't afford." The report determined afford- ability for average wage earners by calculating the amount of income needed to meet major monthly homeownership expenses—includ- ing mortgage, property taxes, and insurance—on a median-priced single-family home, assuming a 20% down payment, and a 28% maximum "front-end" debt-to-in- come ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics. Compared to historical levels, median home prices in 560 of the 575 counties analyzed in Q2 of 2022 are less affordable than in the past. The latest number is up from 459 of the same group of counties in the first quarter of 2022, 397 in Q2 of 2021, and just 251, or less than half, two years ago. That increase has continued as the median national home price has spiked 16% over the past year, while average annual wages across the country have grown just 6%. Major ownership costs on median-priced single-family homes and condos around the U.S. now require more than 28% of the average $67,587 wage in the U.S., a ceiling considered affordable by common lending standards. The current level of 31.5% stands at the highest point since the second quarter of 2007 and is up from 26% in Q1 of 2022 and 23.9% in Q2 of last year. Both increases mark the largest jumps since at least 2000. Affording a home across the nation has gotten significantly tougher in recent months at a time when the U.S. housing mar- ket has roared ahead for the 11th straight year but also faces notable headwinds that could slow it down. One major force remains: home prices have continued to soar in 2022 as a large cohort of homebuyers continues chasing an extremely small supply of proper- ties for sale. Elevated demand has helped push the national median home price up over the past year at more than double the pace of wage growth. But as mortgage rates have steadily climbed this year from just above 3% to near 6% for a 30-year loan, costs have esca- lated for buyers. Higher interest rates, growing inflation, soaring fuel costs, and a declining stock market all threaten the housing market, which could already be showing signs of strain—May marked the fifth consecutive month of lower existing home sales than the prior month. As historic affordability con- tinues to decline, major home- ownership expenses on typical homes are now unaffordable to average local wage earners during Q2 of 2022 in 388, or 67%, of the 575 counties in the report, based on the 28% guideline. The largest populated counties that are unaf- fordable are: • Los Angeles County, California • Maricopa County (Phoenix), Arizona • San Diego County, California • Orange County, California • Kings County (Brooklyn), New York The most populous of the 187 counties where major expenses on median-priced homes remain af- fordable for average local workers in Q2 of 2022 are: • Cook County (Chicago), Illinois • Harris County (Houston), Texas • Philadelphia County, Pennsylvania • Franklin County (Columbus), Ohio • Hennepin County (Minneapolis), Minnesota Home prices continue to rise at least 10% annually in two-thirds of the country. Median single-family home and condo prices in the second quarter of 2022 are up by at least 10% over the second quarter of 2021 in 373 or 65%, of the 575 coun- ties included in the report. Data was analyzed for counties with a population of at least 100,000 and at least 50 single-family home and condo sales in Q2 of 2022. Among the 47 counties in the report with a population of at least 1 million, the biggest year- over-year gains in median sales prices during the second quarter of 2022 are in Collin County (Plano), Texas (+28); Hillsborough County (Tampa), Florida (+27); Maricopa County (Phoenix), Arizona (+25); Clark County (Las Vegas), Nevada (+24); and Salt Lake County (Salt Lake City), Utah (+24). Counties with a population of at least 1 million where median prices have gone up the least or decreased, year over year, during Q2 of 2022 are Oakland County, Michigan (outside Detroit) (-2%); Honolulu County, Hawaii (+4%); Bronx County, New York (+5%); Cook County (Chicago), Illinois (+5%); and Kings County (Brooklyn), New York (+6%). Annual home-price apprecia- tion has been greater than weekly annualized wage growth in Q2 of 2022 in 510 of the 575 counties analyzed in the report (89%), with the largest including Los Angeles County, California; Harris County (Houston), Texas; Maricopa County (Phoenix), Arizona; San Diego County, California; and Orange County, California (out- side Los Angeles). Average annualized wage

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