Kim Bass, incoming president of the Greater Chattanooga Association of Realtors, speaks with the Times Free Press at The Group Real Estate Brokerage on Tuesday, Nov. 20, 2018 in Chattanooga, Tenn.The increase in home prices in Chattanooga outpaced wage gains in the past year, but Chattanooga still remains an affordable housing market compared to most of the country, according to a new housing study released Thursday.
The online property data collection service ATTOM Data Solutions said the median price of homes sold in Hamilton County during the second quarter was up 5.6% in the past year compared with only 1.5% growth in average wages for Hamilton County workers in the past 12 months. Although the recent drop in mortgage rates has helped, higher home prices are making it more difficult for some home buyers, especially first-time buyers with limited equity.
"Affordability of home purchases has declined in our market in the past year and where you see that the most is with first-time home buyers who are more likely to struggle to find a home that they can afford," said Kim Bass, president of the Greater Chattanooga Realtors Association. "But I do think we're coming into more balance now in the market and home prices may not rise quite as quickly. Chattanooga also is a much more affordable market than most areas as homebuyers who come here from many other parts of the country are pleased to find out when they move here."
ATTOM's analysis of property sales and government wage data in Hamilton County show the typical Chattanoogan earning the average annual pay of $49,868 would have to spend 27.8% of his or her income on mortgage bills, property taxes and insurance expenses for the median priced home of $190,000.
Data compiled through the Realtors' multiple listing service last month showed the median home price in Chattanooga rose to $205,000 in May, up 10.8% from a year earlier as home sales rose another 3.8% over the same period a year ago.
Although home buying became less affordable for the typical Chattanoogan in the past year, Chattanooga is still among those metro areas in America where the typical homebuyer for a median priced home can spend less than the recommended 28% of his or her income buying, insuring and paying taxes on their house, the ATTOM study found.
Among the 480 largest counties in America, two thirds of the counties require homebuyers to spend more than 30% of their annualized weekly wages to buy a home in the second quarter of 2019. Most lenders are reluctant to provide traditional mortgages when home buying expenses exceed 30% of a person's income.
"Despite falling mortgage rates and rising wages, the cost of owning the typical home remains out of reach or a significant financial stretch for the nation's average wage earners," said Todd Teta, chief product officer with ATTOM Data Solutions. "However, a closer look at the data reveals milder- than-usual increases for the spring, and none as severe as in previous years since the recession. "
The most expensive market in the country was San Francisco where owning the median priced home of more than $1.4 million required 116.8% of the median annual income for local residents. San Francisco was one of three cities where the entire income of the average worker was not sufficient to pay to meet the mortgage, insurance and tax bills for the median-priced home.
But with the exception of Nashville and Atlanta, most Mid-South markets were below the 30% of income threshold to buy a home.
In Bradley County where median home prices rose 3.9% in the past year compared with an average 4.3% growth in wages, the typical homebuyers had to spend only 24.8% of his or her income on buying, insuring and paying taxes on the typical home.
Nationwide, the most affordable market for home buyers in the second quarter was in Macon, Georgia, where the cost of owning a median priced home was only 12.9% of annual wages.
The ATTOM report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments - including mortgage, property taxes and insurance - on a median-priced home, assuming a 3% down payment and a 28% maximum "front-end" debt-to-income ratio.
Contact Dave Flessner at dflessner@timesfrepress.com or at 423-757-6340.