Due mainly to the fact that wage growth did not keep up with rising home prices, it was less affordable to buy a home in the fourth quarter compared with the third quarter, according to ATTOM Data Solutions’ Home Affordability Index.
In fact, home affordability in the fourth quarter was, on average, at its lowest level since the fourth quarter of 2008, the report shows.
About 29% of U.S. markets were less affordable than their historic affordability averages in the fourth quarter – up from 24% in the third quarter and up from 13% in the fourth quarter of 2015.
It was the highest share of counties where the average price of a home was less affordable than the historic average since the third quarter of 2009, ATTOM says.
Helping to fuel the trend is that wage growth did not keep up with rising home prices in 81% of local markets, according to the report.
Still, home affordability did improve in 18% of markets during the past year, according to the report, which uses publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics to arrive at its findings.
“Rapid home price appreciation and tepid wage growth have combined to erode home affordability during this housing recovery, and the recent uptick in mortgage rates only accelerated that trend in the fourth quarter,” says Daren Blomquist, senior vice president at ATTOM Data Solutions, in a release. “The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year. Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets.”
To view the full report, click here.