A report from Clear Capital and RealtyTrac shows that despite increasing U.S. home prices, homes were at their most affordable level in two years during the first quarter of 2015. The details of the report are highlighted in this article from Trey Garrison of HousingWire.
“Although home prices continue to outpace wage growth in the majority of local markets, this analysis somewhat surprisingly shows that affordability is actually improving in most markets thanks to falling interest rates and slowing home price growth, which is allowing wage growth to catch up in some markets,” said Daren Blomquist, vice president at RealtyTrac. “At the national level, buying an average-priced home in the first quarter of 2015 was the most affordable it’s been in two years and nearly twice as affordable as it was in the second quarter of 2006 – when affordability was its worst in the past 10 years.
“At the local level we’re seeing several bellwether markets where wage growth matched or even outpaced home price growth over the past year,” he said.
Average home price appreciation outpaced average wage growth between the first quarter of 2014 and the first quarter of 2015 in 397 out of 582 (68%) U.S. counties analyzed for the report. But during the same time period, the average interest rate on a 30-year fixed rate mortgage dropped 57 basis points (13%), from 4.34% in the first quarter of 2014 to 3.77% in the first quarter of 2015. The drop in interest rates – along with wage growth outpacing home price appreciation in 32% of counties – meant buying a home in the first quarter of 2015 required a smaller share of the average wage compared to a year ago in 339 of the 582 counties (58%).
Major markets where wage growth outpaced home price growth in the first quarter – counter to the national trend – included Cook County, Illinois in the Chicago metro area; Orange County, California in the Los Angeles metro area; Brooklyn, New York; Fairfax County, Virginia in the Washington, D.C., metro area; and Riverside County in Southern California, where the average weekly wage in the first quarter was up 10% from a year ago, double the 5% growth in average home prices during the same time period.
Since bottoming out in the first quarter of 2012, the average U.S. home price has risen 24% while the average weekly wage nationwide has risen 7% during the same time period and the average interest rate on a 30-year fixed rate mortgage has dropped 5%.
