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Are housing prices outpacing wages in the region?

DON FENLEY • Apr 8, 2019 at 12:00 AM

The good news about Sullivan County’s housing market is it has seen strong growth for the past four quarters. The not-so-good news is the homes are now less affordable. At the same time, Washington County, which has the region’s most expensive homes, saw affordability increase this year.

That’s the broad-brush local finding in Attom Data Solution’s first quarter (Q1) Housing Affordability Report. That report found that the average wage earner could not afford a median-priced home in 71 percent of the U.S. housing markets. That’s a big problem. The housing industry accounts for a little over 15 percent of the economy, and it’s difficult to have a vibrant economy without a vibrant housing market. Fortunately, the local economy hasn’t gone down the housing affordability rabbit hole, yet.

Affordability – as measured by Attom’s Home Price Index (HPI) – in Sullivan has been below its historic level for four straight quarters. But the average wage earner can still afford a median-priced home. And average wage earners in Washington County, where it cost more to buy a home, can do the same. Both counties – and the nine others in the area monitored by the Northeast Tennessee Association of Realtors (NETAR) Trends Report – have experienced strong sales and a healthy sales price growth for the past two years. But only Sullivan and Washington meet the benchmark to be included in Attom’s HPI study.

Attom’s data show the median home price in Sullivan for the first three months of this year was $125,000 – up 15 percent from Q1 last year. During the same period, the annualized  wage of $48,594 was up 6 percent. So, home prices are rising faster than wages. The silver lining to the economic cloud is the annual income needed to buy a median-priced home in Sullivan was $32,940. That price assumes a 3 percent down payment and a 28 percent front-end debt-to-income ratio.

In contrast, Washington County’s Q1 median home price was $145,923, according to Attom. That’s 3 percent higher than Q1 last year. The annualized wage was $41,977, which is 4 percent better than it was last year. So, the home-wages ratio is in a sweet spot – wages are increasing faster than home prices. The annualized income needed to buy one of those median-priced Washington County homes was $38,520 in Q1 assuming the 3 percent down payment and 28 percent front-end debt to income ratio.

In Attom’s report on the national level, there were 335 counties where the median-priced home was not affordable for average wage earners in Q1. Those counties include some of the hottest – and most talk in the media – in the nation. At the same time, the median-priced home was still affordable for average wage earners in 138 counties.

“We are seeing a housing market in flux across the United States, with a mix of tailwinds and headwinds that are pricing many people out of the housing market, but also are creating potentially better conditions for buyers,” said Todd Teta, chief product officer at Attom. “Continually rising home prices in many areas do remain a financial stretch – or simply unaffordable – for a majority of households. However, quarterly wage gains have been outpacing prices increases for more than a year, and mortgage rates are falling, which have helped make homes a bit more affordable now than they’ve been in a year. Affordability may improve because of the simple fact that homes are out of reach for so many home seekers, suggesting that prices need to moderate up in order to attract buyers. Of course, a few quarters do not a long-term trend make. The economy could slow. The impact of last year’s tax cuts could fade, and interest rates could go back up, but the signs point to the possibility of an impending buyers’ market.”

Don Fenley is a semi-retired journalist. For more check out his blog, Core Data, at www.donfenley.com.

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