Home affordability grew in second-quarter, despite virus risks
As home-buying conditions improve, homeowners may also face more affordable insurance rates.
A home’s value is one of the most critical factors impacting what a homeowner will pay for insurance. A new data solutions report from ATTOM shows median home prices stayed more affordable than historic averages in the second quarter of 2020. The findings could also mean homeowners will see more affordable insurance rates, as well, although concerns over the pandemic may have an adverse effect in the coming months.
The study found that 49% of single-family homes and condos in counties with enough data to analyze were more affordable than the historic average. This is up from 31% a year ago. ATTOM determined affordability by calculating the income needed to make monthly payments on a medium-priced home, accounting for a 3% down payment and a 28% maximum “front-end” debt-to-income ratio.
“The latest affordability numbers reveal a win-win situation for sellers as well as buyers,” said Todd Teta, ATTOM’s chief product officer. “Prices are rising again around the country during the current home-buying season, despite worries that the economic impact of the coronavirus pandemic would halt the nine-year run up in home values. But a combination of wage gains and declining mortgage rates are helping to override the increases and make homes more affordable in large swaths of the United States.”
Although buying conditions have improved, the study found that in 74% of counties studied, major costs on median-priced homes remain out of reach for the average wage earner, and in two-thirds of the market, the average wage earner needs to use 30% of their income to purchase their home.
Home prices are also up 5% from last year in much of the country, while price appreciation is outpacing wage growth in two-thirds of the country. A the same time, the survey also found that in a third of markets, the average income needed to purchase a home was at least $75,000.
Todd added that in the coming months, the impacts of the coronavirus pandemic may further affect the housing market.
“Virus pandemic concerns are still quite valid and may show up in the coming months, which could hurt prices as well as affordability,” he said. “That remains a significant potential cloud hanging over the market. But as of now, things are looking up for people on both sides of the buying equation.”
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