ATTOM: Homeownership gets unaffordable in Q4

Home purchase affordability worsened in the fourth quarter of 2020, as average wages fell below the level needed to afford a typical home, according to the ATTOM Data Solutions Q4 2020 U.S. Home Affordability Report. Median home prices of single-family homes and condominiums were less affordable than historical averages in 55% of counties with enough data to analyze, up from 43% a year ago, and 33% in 2017.

At the same time, rising wages and falling mortgage rates helped keep median home prices close to affordable for average wage earners across the country.

Median home prices increased at least 10% in most areas nationwide, outpacing the impact of increasing wages and declining mortgage rates to historic lows. The nationwide median home price of $297,200 in Q4 2020 required an annual gross income of $64,447.

The ATTOM Data Solutions U.S. Home Affordability Index analyzes median home prices from publicly recorded sales deed data and average wage data from the U.S. Bureau of Labor Statistics in 499 U.S. counties with a combined population of 232.4 million. It determines affordability by calculating the income needed to make monthly house payments on a median-priced home with a 30-year fixed-rate mortgage, a $100,000 loan and a 28% maximum front-end debt-to-income ratio.

Compared to historical levels, 275 (or 55%) of the 499 counties analyzed in Q4 2020 were less affordable.

With prices rising faster than earnings, major home-ownership expenses consumed 29.6% of the average wage across the nation during Q4 2020, up from 26.4% in Q4 2019, “and above the 28% benchmark lenders prefer” homeowners spend on mortgage payments, insurance and property taxes, according to the report.

Those costs exceeded the benchmark in 59% of the counties included in the Q4 2020 report.

“Owning a home in the United States slipped into the unaffordable zone for average workers across the nation in the fourth quarter as the numbers continued a year-long slide in the wrong direction,” said Todd Teta, chief product officer with ATTOM Data Solutions. “That’s happened as home prices have continued rising throughout 2020 and the housing market has remained remarkably resilient in the face of the brutal economic fallout from the Coronavirus pandemic.”

Up to 203 counties, or 41% in the report had major home-ownership expenses on typical homes that were affordable for average local wage earners in Q4 2020. The largest of those counties, based on the 28% guideline, were Cook County (Chicago), IL; Harris County (Houston), TX; Philadelphia County, PA; Hillsborough County (Tampa), FL and Cuyahoga County (Cleveland), OH.

The most populous of the 296 counties with unaffordable major expenses on median-priced homes or 53% of the counties analyzed were Los Angeles County, CA; Maricopa County (Phoenix), AZ; San Diego County, CA; Orange County, CA, and Miami-Dade County, FL.

In Q4 2020, median home prices were up at least 10% from Q4 2019 in 79% of all counties in the report with a population of at least 100,000.

Home price appreciation in Q4 outpaced average weekly wage growth in 92% of the counties analyzed in the report. The number of markets more affordable than historic averages declined to224, or 45% in Q4 2020, down from 57% last year. Average wages needed to afford median-priced home in Q4 exceed $75,000 in a quarter of markets.

The highest annual wages required to afford the typical home were in San Mateo County (outside San Francisco), CA ($282,117); New York County (Manhattan), NY ($297,010); San Francisco County, CA ($277,757); Marin County (outside San Francisco), CA ($270,893) and Santa Clara County (San Jose), CA ($250,700).

“The future remains wholly uncertain and affordability could swing back into positive territory. But for now, things are going in the wrong direction for buyers,” said Teta.

First American: Super-sellers’ market may hinder affordability in 2021

First American Financial Corporation’s (FAF) October 2020 Real House Price Index (RHPI) shows the nominal house price appreciation was 7.9% higher in October, compared to March 2020, indicating that these price gains reduced the effect of a 10.7% increase in house-buying power over the same period.

RHPI, a measure of price changes of single-family properties and home purchase affordability throughout the U.S., reflects the impact of income and interest rate changes on consumer home buying power at the national, state and metropolitan area level and serves as a measure of housing affordability.

Mark Fleming, chief economist at FAF, found it is unclear whether the trend of declining affordability will continue, or if the robust house-buying power will be enough to offset the 2021 growth in nominal house price appreciation.

Mortgage rates are consistent enough across the nation. When mortgage rates fall, they increase purchasing power and affordability in every city, he said, but household income levels and nominal house prices vary market by market, so their effect on affordability is inconsistent.

If before the pandemic, it was a sellers’ market driven by a tight supply of homes for sale. Currently, supply is even tighter relative to demand and can only be characterized as a super-sellers’ market, explained Fleming. “The pandemic has intensified a sense of home as refuge, and falling mortgage rates have made financing a home purchase historically inexpensive,” which generates strong demand that fuels house price appreciation, he said.

The October report examined how affordability trends have fared at the market level “in particular, during the post stay-at-home-order super-sellers’ market of June to October,” said Fleming. It found affordability has improved nationally by 2.5% since the recession started in March.

From March through June, declining interest rates and rising incomes were enough to offset price appreciation gains and improve affordability, said Fleming. Once potential homebuyers emerged from the stay-at-home orders implemented early in the pandemic, the housing market started to heat up again. However, the RHPI levels in October show affordability declined in 24 of the top 50 markets tracked compared to June.

The five markets with the greatest decline in affordability since June were Las Vegas (-4.9%), Cleveland (-4.6%), Kansas City, Mo (-4.6%), Hartford, Conn. (-4%), Providence, R.I. (-3.8%).

June marked a turning point in affordability trends. Since March affordability improved anywhere from 2.4% to 9% until the pent-up demand from spring returned in June “and the super-sellers’ market emerged,” said Fleming. “Between June and October, nominal house price appreciation exploded in all five markets and household income levels declined in each market, except Cleveland, due to the economic stresses of the recession.”

The states with the greatest year-over-year decrease in the RHPI include California (-9%), New Hampshire, Hawaii and Massachusetts (-7.6%) and Nevada (-7.4%).

Recent history shows during economic distress, “in a super-sellers’ market where nominal house prices are increasing rapidly, lower mortgages are not always enough” to offset price gains, said Fleming.

He expects low mortgage rates combined with an improving economy, as vaccinations spread, will keep house-buying power strong in 2021, “while housing supply constraints will likely remain and continue to fuel a sellers’ market.”

Consumers to purchase two CFBank branches in Ohio

Consumers National Bank has signed an agreement to acquire the Wellsville, Ohio drive-up branch and the Calcutta, Ohio branch of CFBank, National Association, a subsidiary of CF Bankshares Inc. present in Ohio since 1892.

The purchase and assumption agreement will allow the transfer of the land, buildings and other associated assets of the two branches, approximately $100 million in deposits, and certain loans and other interest earning assets by CFBank to Consumers National.

Consumers will pay to CFBank the net book value of the land, building and associated assets, the par value of the earning assets, the company said, and a deposit premium equal to 1.75% of the average daily deposits for the 30 days preceding the transaction closing.

Subject to regulatory approval and satisfaction of closing conditions, the banks expect to close the transaction in the second quarter of 2021, when the branches will operate as Consumers branch offices. 

Based in Minerva, Ohio, Consumers National is the single bank subsidiary of Consumers Bancorp Inc. The $750 million asset independent community bank has 17 full-service branch locations and a Wayne County loan production office. 

Due to the purchase, Consumers expects an increase of nearly 10% in earnings per share, boost of its total assets to approximately $850 million by Q2 2021, and strengthen its competitive position in Columbiana County and Jefferson County locations. 

“Consumers will hold approximately 12.5% of the Columbiana County deposit market share. These locations will house commercial and mortgage lenders and will provide a full range of consumer and business services,” said Ralph J. Lober II, Consumers’ president and CEO. “The current retail employees in Wellsville and Calcutta will help us serve the region’s consumer, small business, and agricultural communities.”

The sale of these two branches follows the bank’s strategic objective to deploy capital in high yield areas that help strengthen franchise value, said Tim O’Dell, president and CEO of CFBank.

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