America’s List of “Unaffordable” Counties is Growing Quickly

This post looks at how affordability has been changing over time. Housing prices have risen dramatically in the past 2 years, and healthily grown over the past 10. But the combination of low mortgage rates and increases in median income had dampened the affordability impacts of rising home prices for a while.

Not anymore.

The combined impact of rising housing prices and rising mortgage rates is starting to make a big dent in affordability across the U.S.  Today, the typical home in more than 250 counties would be considered unaffordable to households earning the national median income. This is a dramatic increase over 2021, and even more so over the past decade.

How is this determined? The chart below shows “affordable” monthly payments by year for that year’s median income household, using 28% of monthly income as the affordability rule of thumb. As you can see, median income households could afford $1,200 payments in 2012, rising to nearly $1,600 in 2020 before a slight dip in 2021. There’s some early indications that wage have risen by double digits in the past year, so for the purposes of this analysis I’ve estimated 2022’s acceptable payment as nearly $200/month higher.

Using this “affordability threshold”, I estimated monthly payments for purchase of the typical home in counties across the U.S., using typical home price in April of each year from Zillow’s ZHVI, and applying the average mortgage rate for each year per Freddie Mac.

The chart below shows the number of counties whose expected monthly payment on newly purchased homes exceeds exceed our affordability threshold, each year from 2012 to 2022. As you can see, 2022 added more than 150 new counties to the “unaffordable” category, now sitting at 262, more than doubling any other year analyzed. And that includes historically rapid wage growth.

The locations of these unaffordable counties are shown in the map. The dark green counties are those that were unaffordable in 2022 and in years prior. These are mostly major metro areas or highly sought-after vacation or quality-of-life destinations. But 2022 added a much wider array of unaffordable locations in a larger number of states and regions. In several places, the suburban areas of already-unaffordable places themselves became unaffordable, including New York, Washington DC, Boston, Seattle, and Southern California. But many secondary or tertiary markets also emerged as newly unaffordable, including portions of Atlanta, South Florida, some big cities in Texas, North Carolina’s bigger metro areas. Additionally,  increasingly larger portions of the Mountain West is now within this unaffordable tier.

NOTE: The originally published version of this map was erroneously showing locations unaffordable in 2022 based on 2021 median income. This map is a corrected version.

Here’s a list of the counties now in the “unaffordable” category.

We need to tackle the implications of these changes soon. For now, I think it’s just worth acknowledging the scope of the affordability changes happening right now.