Bay Area Housing Affordability Improves in the Third Quarter

  • Affordability increased nationwide and in all nine Bay Area counties from the second quarter.
  • San Francisco was the only Bay Area county where annual wage growth outstripped home price gains in the third quarter.
  • Marin County residents must spend more than 100 percent of the average annual wage in order to afford a home.

Some welcome news for Bay Area home shoppers: Affordability increased in every local county in the third quarter. Unfortunately, the region’s home price growth continues to outpace wage growth for the most part.

ATTOM Data Solutions’ latest Housing Affordability Index increased by 2 percent from the second quarter to the third quarter to 100, meaning that U.S. affordability conditions are exactly on par with their historic average. Despite the quarterly improvement recorded in 60 percent of markets analyzed, housing affordability is at its lowest level nine years.

Nationwide, the median sales price ended the third quarter at $249,373, up 6 percent year over year. Wage growth kept pace, also growing by 6 percent, but falling mortgage rates helped to slightly loosen affordability conditions. In a statement accompanying the report, ATTOM Data Solutions’ Senior Vice President Daren Blomquist stressed the need for higher wages in order to keep affordability in check on a long-term basis.

“More sustainable relief for the affordability crunch, however, will need to be some combination of slowing home price appreciation and accelerating wage growth,” he said. “Wage growth is outpacing home price growth in about half of all local markets so far this year, an indication that a more sustainable affordability pattern is taking shape in more local markets.”

Most Bay Area housing markets were not among the 48 percent where annual wage growth was higher than home price appreciation. Alameda, Contra Costa, San Mateo, Santa Clara, Solano, and Sonoma counties all saw home prices grow faster than wages, while price and income increases were even in Marin and Napa counties. Only San Francisco enjoyed an improvement, where prices grew by 6 percent and wages increased by 10 percent.

All nine Bay Area counties saw housing affordability increase from the second quarter, ranging from 19 percent in Marin County to 3 percent in Solano County. Five are still more affordable than their historic norms: Marin, Napa, San Francisco, Santa Clara, and Solano counties.

Even with the quarterly affordability improvement, Bay Area homebuyers must spend substantially more of their annual wages on mortgage payments than the national rate of 37.7 percent. Marin County residents would need to shell out 104.7 percent of their average wages in order to afford a home, the second most in the country. Elsewhere across the Bay Area, the percentage of wages necessary to afford a home ranges from 83 percent in San Francisco to 50.4 percent in Solano County.

(Photo: iStock/turk_stock_photographer)

Shared with permission from the Pacific Union Blog