U.S. Home Affordability Sinks: Impact on Real Estate Investing
In Q3 2023, ATTOM's U.S. Home Affordability Report revealed that median-priced homes are less affordable in 99% of analyzed counties, continuing a two-year trend of increasing difficulty for average U.S. wage earners to own homes. Affordability worsened due to rising home prices and mortgage rates, with the portion of average wages needed for major homeownership expenses reaching 35%, exceeding common lending standards. This unaffordable level is the highest since 2007. Homeownership challenges may impact prices as demand decreases. Despite current trends, forces affecting affordability are dynamic, making future outcomes uncertain.
The report indicates that major ownership expenses are unaffordable in 457 counties, with Los Angeles, Chicago, Phoenix, San Diego, and Orange County having the largest populations among them. Home values have risen for two consecutive quarters, reaching a new record of $351,250 nationally. While this pattern suggests a potential impact on prices, market dynamics remain in flux.
The report also reveals that annual price appreciation has outpaced wage changes in 47% of analyzed counties, signifying a shift from the previous quarter. Homeownership costs, consuming 34.6% of the average national wage, highlight the growing challenge. Notably, affordability conditions are less favorable than historical averages in 99% of counties, reaching the worst point since 2007.
As homeownership becomes less affordable, the hurdle for real estate investing also rises. With home prices and mortgage rates surging, the financial barrier to entry into real estate investment becomes even more formidable. This trend underscores the urgent need for addressing diversity and inclusion in the housing market, given the rising disparity between housing costs and average wages.
As the challenges of home affordability persist, the landscape of real estate investing undergoes a parallel transformation. For potential investors, the increasing unaffordability of homes amplifies the significance of strategic investment choices. While traditional home ownership may pose hurdles, real estate investment platforms tailored for diverse financial capacities emerge as attractive alternatives. Exploring avenues such as fractional real estate ownership, real estate investment trusts (REITs), or innovative proptech solutions becomes crucial. In navigating these changes, individuals can not only adapt to the evolving market dynamics but also find opportunities to participate in real estate ventures aligned with their financial goals. The shifting paradigm in housing affordability prompts a reevaluation of investment strategies, inviting investors to explore avenues that resonate with the evolving landscape of real estate.