Homes are now unaffordable in 99% of the US for average Americans

Housing prices are growing more unaffordable even with the astronomical rise in mortgage rates, putting ownership out of reach for millions of Americans.

That's according to a new report published by real estate data provider ATTOM, which examined 572 U.S. counties and determined that median home prices in 99% of those areas are out of reach for the average income earner, who makes about $71,214 annually.

"The latest trend continues a two-year pattern of homeownership getting more and more difficult for average U.S. wage earners," the report said. 

Affordability is worsening across the country, thanks to a third-quarter spike in both home prices and mortgage rates. Combined, the two have helped to push the typical portion of average wages nationwide required for major homeownership expenses up to 35%.

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"The latest number is considered unaffordable by common lending standards, which call for a 28% debt-to-income ratio," the report said. "It marks the highest level since 2007 and stands well above the 21% figure from early in 2021, right before home-mortgage rates began shooting up from historic lows."

There are several reasons to blame for the worsening affordability crisis.

The Federal Reserve's aggressive interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly two decades last year. Rates have been slow to retreat, notching a new 23-year high at the end of September.

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The average rate for a 30-year fixed loan jumped to 7.31% last week, Freddie Mac reported, well above both the 5.89% rate recorded one year ago and the pandemic-era lows of 3%.

Even though mortgage rates are nearly double what they were three years ago, home prices have hardly budged. That is largely due to a lack of available homes for sale. Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.

The number of available homes on the market at the end of July was down by more than 9% from the same time last year and down a stunning 46% from the typical amount before the COVID-19 pandemic began in early 2020, according to a recent report from Realtor.com.

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The housing shortage has only served to boost consumer demand, which is keeping prices uncomfortably high. The National Association of Realtors reported that the national median existing-home price was $407,100 at the end of August — up 3.9% from the same time one year ago. 

"The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices," said ATTOM CEO Rob Barber. "We will see how this shakes out as the peak 2023 buying season winds down."