Homes are unaffordable in 4 out of 10 U.S. counties

House hunters are increasingly getting priced out of the real estate action, with homeownership now out of reach for most people in more than 4 in 10 counties across the U.S., a new analysis shows.

Home prices jumped more than 10% in two-thirds of the 569 counties tracked by Attom Data Solutions, a provider of property data. All together, those counties represent about 250 million Americans, according to the research firm, which analyzed publicly recorded sales-deed data for counties that recorded the most real estate transactions between April and June.

The number of counties where homeownership is now considered unaffordable jumped about 20% from a year earlier, rising to 242 counties in the second quarter compared with 205 in the year-earlier period.

The latest data signal that America’s housing market is going in the “wrong direction,” said Todd Teta, chief product officer with Attom. The surge in home prices is raising concerns with some market observers that soaring real estate prices may herald the same type of overheating that led to the 2006 housing bubble. The current market is fueled by ultra-low mortgage rates and demand for homes from millennials.

What is considered “affordable”?

“That 20% more counties are unaffordable is problematic,” Teta said. “We’re starting to creep up to where it will be generally unaffordable on a national basis. Anything that causes mortgage rates to go up and prices to go up will put us over the tipping point.”

The rise in home prices means ownership costs are higher across the nation, even though the majority of U.S. counties are still considered affordable, Teta noted. The typical home now requires 25.2% of the average national wage of about $64,000 — up from 22.2% of the average wage a year earlier and its highest point since the third quarter of 2008. 

Homeownership is considered affordable if homeowners pay less than 28% of the typical local annual income on their properties, including costs for mortgage payments, home insurance and property taxes. As property prices rise, homebuyers must pay above that threshold in about 43% of the country’s counties, the study found. 

Those counties range from Berkeley, West Virginia — where home buyers need to pay roughly 28% of the typical income to afford a home — to Kings County, New York, better known as Brooklyn, where home buyers need more than 100% of a Brooklynite’s typical annual income to buy a home. 

“It’s getting closer to becoming unaffordable in most counties,” Teta said.

Lack of inventory

A dearth of homes on the market is one of the main drivers of higher prices, causing buyers to bid up homes — often with all-cash offers — and even forego traditional sale contingencies like home inspections. It’s also holding back would-be sellers. 

With 20% fewer properties on the market compared with a year ago, some homeowners are opting to stay put rather than deal with the struggle of finding a new place to live. But that creates a vicious cycle, with shrinking inventory leading to bidding wars and more reluctance on the part of some homeowners to list their homes for sale.

Investors with deep pockets drive up housing … 06:24

“The available inventory of homes for sale last month translated into 2.5 months of supply at the May selling pace, up from 2.4 months in April,” Nancy Vanden Houten, lead economist at Oxford Economics, said in a report. “Six months of supply has historically been considered a sign of a balanced housing market.”

10 most affordable counties in U.S.

  • Schuylkill County, Pennsylvania, outside Allentown, 5.5% of annualized weekly wages needed to buy a home
  • Bibb County (Macon), Georgia, 8% percent
  • Cambria County, Pennsylvania, outside Pittsburgh, 8.2%
  • Macon County (Decatur), Illinois, 9.1% 
  • Peoria County, Illinois, 10.4%
  • Rock Island County, Illinois, 10.4%
  • Wayne County, Michigan, 10.7%
  • Broome County, New York, 10.7%
  • Delaware County, Indiana, 11.2%
  • Chautauqua County, New York, 11.2%

10 least affordable counties in U.S.

  • Kings County (Brooklyn), New York, 100.8% of annualized weekly wages needed to buy a home
  • Marin County, California (outside San Francisco), 81.4%
  • Santa Cruz County, California, 76.2%
  • Queens County, New York, 68.7% 
  • Monterey County, California (outside San Francisco), 65.9%
  • Nassau County, New York, 63%
  • San Luis Obispo County, California, 62.4%
  • Sumner County, Tennessee, 62.1%
  • Orange County, California, 59.2%
  • Napa County, California, 59.1%