Home Affordability Improves Slightly in Q1, But Nowhere Near Historic Norms

The landscape of home affordability in the United States has shown a slight improvement in the first quarter of 2024, according to the latest U.S. Home Affordability Report by ATTOM. However, despite this modest uptick, the dream of owning a median-priced single-family home or condo remains elusive for many Americans, as affordability metrics still lag behind historical averages across the vast majority of the country.

The report, which encompasses an analysis of 590 counties, reveals a stark reality: 577 counties, or more than 95%, continue to experience levels of home affordability that are less favorable compared to past norms. This represents a slight decrease from the 584 counties reported in the fourth quarter of 2023 but is an increase from 549 counties in the first quarter of the previous year. It starkly contrasts with the figures from early 2021, when only a fraction of counties showed such disparities in affordability.

A key driver of this persistent affordability issue is the upward trajectory of home prices. The national median price for single-family homes and condos reached $336,250 in the first quarter of 2024, approaching the all-time high of $345,000 observed in recent years. This marks a 1.9% increase from the fourth quarter of 2023 and a 5.1% rise from the first quarter of the previous year, indicating a sustained upward pressure on home values.

Despite these price increases, the typical costs associated with homeownership—including mortgage payments, insurance, and property taxes—have slightly declined as a percentage of the average annual national wage, from 33.2% in the fourth quarter of 2023 to 32.3% this quarter. However, this ratio remains significantly higher than the 29.6% reported in the first quarter of last year and is a far cry from the 21.3% low point reached in the first quarter of 2021.

Rob Barber, CEO of ATTOM, commented on the findings, noting that “Affording a home remains a financial stretch, or a pipe dream, for so many households.” He highlighted the role of decreasing mortgage rates and moderate home price growth in making homeownership slightly more attainable for average wage earners early this year. Barber also pointed to the upcoming Spring buying season as a critical period that will reveal whether home prices stabilize enough to sustain or even improve affordability.

The report’s findings underscore a complex issue at the heart of the American dream: while there is a glimmer of hope for potential homebuyers, the path to homeownership remains fraught with challenges. As prices continue to outpace wage growth in a majority of counties, many Americans find themselves on the outside looking in, with the goal of owning a home increasingly difficult to achieve. The months ahead will be telling, as the real estate market navigates through the Spring buying season, potentially setting the tone for home affordability trends for the rest of the year.