US Homes Are Least Affordable Since 2008

As we pointed out yesterday, the still-tight supply in the US housing market is helping drive home prices higher, creating a crisis of affordability that has placed homes financially out of the reach of many millennials. As we pointed out after yesterday's existing home-sales slump, the reason for the drop in sales was a nearly 5% YOY climb in the median sales price of a home in the US. Today, ATTOM Data Solutions released its Q2 2018 housing affordability report, which determined that homes at at their least affordable level since Q3 2008.

Median

Indeed, the affordability problem has worsened, even as the pace of home price gains has slowed, thanks to an 11% increase in mortgage rates compared with a year ago. "Meanwhile home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates."

Housing

The median home price is currently $245,000, up 4.7% from a year ago, but representing a slowdown from the 7.4% pace of appreciation in the first quarter. Still, that's well above the recent average weekly wage growth of 3.3%. Over a longer period of time, the trend is even more jarring: Prices have increased 75% nationwide since bottoming in 2012, while average weekly wages have only increased 13% during the same period.

Annual growth in median home prices outpaced average wage growth in 275 of the 432 counties, including some of America's largest. The list includes Los Angeles County, California; Maricopa County, Arizona; San Diego County, California; Orange County, California; and Miami-Dade County, Florida.

Nationwide, an average wage earner would need to spend 31.2% pf their income to buy a median-priced home in Q2 2018. That's above the historic average of 29.6%. Somebody earning the average wage wouldn't qualify to buy a median-priced home in 326, roughly 75%, of the 432 counties analyzed in the report. ATTOM determined whether a home was affordable for the average wage earner by calculating the amount of income needed to make monthly mortgage payments, plus property taxes and insurance.

If millennials - particularly those living in expensive coastal cities - ever want to afford a home, they better pray that wage growth picks up remarkably. Otherwise, most will need to rely on help from parents if they ever want to afford a home. And if they don't have parents capable of helping, well, they may never realize the American dream of home ownership.

Comments

peopledontwanttruth wadalt Thu, 06/21/2018 - 13:19 Permalink

I know a bunch of realtors and they’ve all been sitting around beating their chests on how great the market is.  How they’ve gotten prices back up to 2008 levels and beyond.  

How stupid can you be inflating the price of the homes 6% or more to cover the closing cost and now you’ve  priced yourself out of a job and set up another tsunami of foreclosures.  

In reply to by wadalt

directaction HRClinton Thu, 06/21/2018 - 13:12 Permalink

A friend of ours is a recent university graduate. She rents a dump in San Diego. She has a one-bedroom, 600 sq foot apartment in need of remodeling. It's $2,400/mo. 

She has been expressing interest in buying a condo instead, and has her eyes on a new,  roomy, gated one-bedroom near the ocean in a wealthy area for $875,000. She graduated without debt and has $100,000 down. Her payment would be around $4,000/mo with a five-year adjustable.

I suggested that she keep renting and wait until the current housing price bubble corrects, which I said could occur at any time. 

She asked me, "What's a housing price bubble and correction?"

In reply to by HRClinton

Quantify directaction Thu, 06/21/2018 - 14:40 Permalink

That's California with 10 million illegals and IT people getting 4x average salary than anywhere else because no one wants to live to live with the 40 million people (10 million are illegal) and the high taxes and the traffic, the earthquakes, the crime, the fires, the floods and the idiocy. Except for DC of course which is almost as bad.

In reply to by directaction

devo Thu, 06/21/2018 - 12:47 Permalink

American dream of home ownership? American nightmare after these property taxes, repair costs, insurance, HOAs rising, and inability to move and get the same rate.

peopledontwanttruth devo Thu, 06/21/2018 - 13:30 Permalink

My uncle just called me two nights ago.  Been living in his house for years and never remotely close to ever flooding from very small creek across the street from him.   Gets notice from Mortgage Company stating he’s required to get Flood Insurance    His quote from FEMA $6000 a year.  The best he could get through his Mortgage Company ironically $1200/year.  

 

They’re retired and literally can’t afford it   Welcome to the land of the fee and Home of the slave 

 

In reply to by devo

dogmete Thu, 06/21/2018 - 12:48 Permalink

Where'd this chart come from?  

The Case-Shiller chart showed the average house price at 184K back in 2006  and shows we're presently at 198k.

Zillow price index presently puts average house value at 215k. 

Zero Hedge pulls a number out from somewhere: 245k ?

 

Froman Thu, 06/21/2018 - 12:50 Permalink

In South Florida one of the things that has kept the prices up are investors.  They are buying condo units sight unseen and renting them out with an average 2BR rent of $2,400.  The developers are more than happy to accommodate the demand and just continue to build (see Miami World Center).  This has kept the prices very high.  Certain areas have peaked and are starting to cool at the upper end but the mid and low end are still very hot. 

rejected Thu, 06/21/2018 - 12:53 Permalink

Tight housing market

bwahahahahahahahahhahahhahahahahahahhahahahahahhahaahahahahaha

Maybe for those shit built MacMansions that run several hundred thousands so banksters can gouge them for years and years.

Older homes 1980's, 90's are all over the place but those are beneath Americans barely surviving on two incomes. Gotta have that $300,000 dollar house,,, $50,000 F150 and another $60,000 Audi,,, $1000 iPhone,,, a $10,000 Omega,,, and so on.

Angry White Guy rejected Thu, 06/21/2018 - 13:13 Permalink

I know that your opinion is shared by many on here, and it comforts you to think the reason people aren't making it is simply due to bad financial decisions but I can assure you we have a huge class of folks busting their asses going to work everyday not blowing it on crappy new F150s that are simply resigned to neo-feudal surf status out of no fault of their own.

 

When you have wage growth in the negative area for YEARS while real-estate growth is double digit year over year for YEARS - you're going to leave mid to low earners behind.  That's simple mathematics.

BTW in CO where I live old homes appreciate in value just as much as newer ones.

I will agree with you on one thing - it's not a 'free' nor is it a 'tight' market.  

In reply to by rejected

Salmo trutta Thu, 06/21/2018 - 13:14 Permalink

No housing bubble (just a recession induced inventory gap). The decline in new housing starts bottomed in April 2009, under 500,000 units/year – a record low since 1959.

“Based on pre-boom norms, we failed to build about 3.5 million units during the five bust years since 2008 –a total that keeps climbing.”…”In other words, the homebuilding shortfall since 2008 has been twice as large as the foolish overbuilding during the boom”. “Failure to solve the foreclosure problem is one of the reasons we have had such a weak housing sector and weak recovery for so long”. --Alan S. Blinder “After the Music Stopped”

Just un-necessary inflation. But soaring income inequality.

It's all correctable. Just gradually drive the commercial banks out of the saving business (where savings are frozen and lending becomes both geographically and riskier skewed). Then the commercial banks and the non-banks will become more profitable. R-gDp will grow faster than inflation (all income groups will see real gains). Real rates of interest will be higher for saver-holders (outside the payment’s system), and CAPEX outlays will be stimulated. It will require that non-bank pooled savings be government insured (as During the U.S. Golden Era in Economics).

Just think about it. That prescription is just the exact opposite of the last 53 years. We will just back up and reverse the trend. Admit our mistakes.

Savings flowing through, transferred through, non-banks conduits, never leaves the payment’s system. The growth of the non-banks has no effect, per se, on the aggregate assets, earning assets, gross income, or net profits, of the payment’s system as a whole.

But the growth of non-bank lending/investing activates monetary savings and tends, therefore, to increase bankable opportunities (the exact opposite of the current dilemma). The loan-pie grows as the economy grows.

Salmo trutta schrock Thu, 06/21/2018 - 14:53 Permalink

The U.S. Golden Era in economics was where pooled savings were gov’t insured, e.g., by the now defunct FSLIC, then promptly (how intermediaries function), “activated” and put back to work via non-bank conduits, the “thrifts”, largely thru the S&Ls, MSBs, and CUs (George Baily’s “It’s a Wonderful Life”).

Then the DIDMCA transformed these thrifts into money creating commercial banks (which created the S&L crisis).

It is axiomatic. Commercial banks, from the standpoint of the economy and the system, always create new money whenever they lend/invest with the private sector, the non-bank public. DFIs do not, and cannot, loan out existing deposits (saved or otherwise), or the owner’s equity, or any liability item.

The magnitude of this egregious error is unfathomable. It is directly and solely responsible for secular strangulation. See George Selgin, of Alt-M (who just testified before Congress):

“None of this would matter if the Fed acted as an efficient savings-investment intermediary, as commercial banks are able to do, at least in principle.” And: “This is nonsense, Spencer. It amounts to saying that there is no such things as 'financial intermediation,' for what you claim never happens is precisely what that expression refers to."

Take Dr. Daniel Thornton:

Re my comment: “Savings are not a source of "financing" for the commercial bankers”
Dan Thornton’s response:

Thu 3/9, 2:47 PMYou

See the graph below.

http://bit.ly/2n03HJ8

Not only are the Fed's econometric models wrong, but their macroeconomic concepts reflect this. These McCarthyites have learned their catechisms, that there is no difference between money and liquid assets (the Gurley-Shaw thesis).

N-gDp targeting leads to FOMC schizophrenia: Do I stop because inflation is increasing? Or do I go because R-gDp is falling? [Stagflation’s dilemma, viz., the FOMC’s policy mix]
Remember the stagflationists?

http://bit.ly/2s67De9

Inflation is the most destructive force capitalism encounters.

In reply to by schrock

Chief Joesph Thu, 06/21/2018 - 13:15 Permalink

Good Bye American Dream.  You can thank your predatory bankers, your real estate business, for making homes so unaffordable and enslaving you by putting you in perpetual debt.  And you can thank your government for destroying the value of your dollar too, so you can't buy much of anything.  And you Americans thought you had such a great idea of ownership, when you took away Native American Indian lands to settle on.  See it all came back to bite you in the butt, like it did your Medieval European ancestors, 500 years ago.  Get use to living in a car or under a bridge. 

August Chief Joesph Thu, 06/21/2018 - 13:35 Permalink

If money were made of iron and could be converted into knives, axes and chisels there would be some sense in placing a value on it; but as it is, I see none. If a man has more yams than he wants, let him exchange some of them away for pork. Certainly money is much handier and more convenient but then, as it will not spoil by being kept, people will store it up instead of sharing it out as a chief ought to do, and thus become selfish.  I understand now very well what it is that makes the papālangi [white men] so selfish – it is this money!

ʻUlukālala II, King of Tonga, 1809

In reply to by Chief Joesph

MusicIsYou Thu, 06/21/2018 - 13:34 Permalink

You don't ever actually own your home anyway, and most deeds just call you a 'Grantee' who is possessing and controlling the property. And then if you get it paid in full you become the 'Grantor' but never actually the owner. Oh yeah, and they make you pay whatever taxes they want you to. Unlike most dolt Americans I understand what legal sounding jargon is all about: using words that sound powerful that sound like they empower a property owner, while in reality it castrates property owners.

MusicIsYou Thu, 06/21/2018 - 13:34 Permalink

You don't ever actually own your home anyway, and most deeds just call you a grantee who is possessing and controlling the property. Oh yeah, and they make you pay whatever taxes they want you to. So millennials are not missing out on much.

MusicIsYou Thu, 06/21/2018 - 13:44 Permalink

It's kind of funny, people are in debt up to their eyeballs paying for a home that's not really theirs, and even when it's paid in full they still aren't really the owners. Yeah, stop paying taxes on it and see how long you stay the owner. Or see if industry decides you are going to move so they can mine your land for which most so-called homeowners do not own mineral rights under their house.

MusicIsYou Thu, 06/21/2018 - 13:47 Permalink

Millennials are not missing out on much, they're just missing out on the American Delusion. People with actual wit know why its called the American Dream, because that's all it is....a dream. I think delusion sounds better.

CultiVader Thu, 06/21/2018 - 14:04 Permalink

Yeah, all good points and well understood. But if you're gonna raise a family, you're doing a disservice by renting and being transgient. There's no way around the usury, the taxes, the fees.
You could do like my parents did and rent. Then your kids can move 10 times before they finally move out on their own, going to a new school 5 or 6 times and having no understanding of what roots are.

Jack's Raging … CultiVader Thu, 06/21/2018 - 14:35 Permalink

I was raised mobile, and it served me very well. It gained a greater deal of life experience, courage, and exposure than those who grew up in the same place. I know several people who are broke because they lack the perspective to understand there are better places for them, and also lack the courage to risk seeking them. Familiarity has paralyzed both their mind and spirit.

I will say that growing up a gypsy hindered me in valuing extended family, and in some ways the broader community. I am lucky to have since learned it from my wife and her family. 

In reply to by CultiVader

MusicIsYou Thu, 06/21/2018 - 14:12 Permalink

Mathematics is just something people are brainwashed to do on paper or computer. Because if they could apply math to real life then they would know they can not own a home when they don't own their personal information or even their DNA. It is literally impossible to not own your personal information and DNA, but think you own a home.

Lie_Detector Thu, 06/21/2018 - 14:48 Permalink

I see lot's of empty homes that "the fed" bought in the 2008 meltdown. They have kept these homes off the market to 

keep prices rising. The same with automobiles. I live near Flint MI and you would NOT BELIEVE the oceans of 

auto's sitting in various "lot's". I am not only talking smaller lot's. I am talking ACRES of late model cars, trucks, etc. just sitting. They are likely lease returns from the last few years. They keep them out of the market because prices would PLUNGE. I drive a 22 year old dodge pickup not because I want to, it is because the price of newer ones are WAY too expensive. At some point these auto's and houses will have to go back onto the market (or bulldoze the houses and crush the cars). That is as bad as China building cities that no one can afford to live in, so they knock them down. Get rid of the "fed" now! This is ridiculous.