Washington’s Housing Attainability Crisis in Each County: Part 2

Background

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The state is experiencing a housing attainability crisis. We’ve begun using the term attainable because the term affordable has become synonymous with government subsidized housing. While it’s an important piece of the housing market for various reasons, we prefer to focus on housing that families can own, also referred to as “market-rate” housing. The term attainable, as defined by the Merriam Webster dictionary: “capable of being done or carried out” and “possible to get.” Unfortunately, as the key findings above illustrate, Washington is moving further away from homeownership attainability for a
majority of the population.

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If the supplemental budget passed in the 2022 Legislative Session is any indication, current leadership thinks the solution to the state’s housing crisis is to pump more money into the Housing Trust Fund to build more government-subsidized units that will never be owned by the majority of Washington’s families. This not only drastically reduces opportunities for families to increase household equity and establish intergenerational wealth, but it also limits generational mobility. Further, it prevents traditionally marginalized communities from ever breaking the perpetual cycle of poverty.

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Various policy solutions exist to combat our housing attainability crisis and increase homeownership opportunities for all Washingtonians. BIAW hopes policymakers will explore the myriad of policy options with us as they consider any and all laws and regulations. Our members truly want to invest in their communities and build homes for families. We need our government leaders to help achieve a more balanced housing market.

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Executive Summary

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BIAW’s national counterpart, the National Association of Home Builders (NAHB) produces an annual priced-out report for new homes. NAHB’s report focuses primarily on major markets and submarkets. To help state and local policy makers better assess the depth of the problem across the new and existing housing market, BIAW compiled a report that captured the same information on a localized level and included the average of all home sales—new and existing.

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We utilized NAHB’s methodology to identify what percentage of households in each county could afford a mortgage at the current median home sales price in each county. Secondarily, we calculated the number of households that would be priced-out for each additional $1,000 that is added onto the price of a home.

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Key findings:

• Only 15% of Washington households can afford to purchase a median-priced home. That means 85% cannot afford to purchase a home.
• All 39 counties in Washington have more than 50% of households that cannot afford a median-priced home in their county.
• 27 of the 39 counties have more than 80% of households that cannot afford the median-priced home.
• While King County boasts the highest overall median home prices, the counties least able to afford homes include Kittitas, San Juan, Skamania, Snohomish, Stevens and Whatcom.
• In all of these counties, more than 90% of households cannot afford to purchase a home in their county.

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Methodology

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To replicate NAHB’s study, BIAW gathered much of the same data for use in computations. Where the BIAW study differs is the usage of the 30-year Federal Housing Administration (FHA) mortgage loan product, rather than a 30-year conventional loan product. BIAW’s reasoning is that this loan product is easier to qualify for since the barriers to entry into homeownership do not include a 20% down payment and allows for approval with lower credit scores.

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BIAW used the FHA’s minimum requirement of a 3% down payment (which then includes private mortgage insurance – PMI – to offset the risk of the lender). Assumptions in calculating the affordability of mortgages based on median sales price include: borrower holds $0.00 in debt, has a 700-719 credit score, qualifies for a 5.35% interest rate (as of April 20, 2022), and purchases a property without a Home Owners’ Association fee. According to Smart Asset, the average property tax in Washington was $2,325. This is an average and can result in a much lower or much higher tax depending on the county in which the home is located. Similarly, Bankrate provided an average homeowner’s insurance rate of $863. Like property taxes, insurance can vary widely on the condition and location of the home. Because many variables are in play, we elected to use the averages of both figures to simplify this study.

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All other data points listed within this study were gathered from the U.S. Census Bureau, with the exception of current median home sales prices (retrieved from Redfin on April 20, 2022). Calculations for determining the required income to purchase the median-priced home for each area were completed in the Mortgage Loan ‘Mortgage Required Income Calculator.’ This was done solely for the ability to change property tax and homeowner’s insurance values, as well as an automatically generated PMI estimate.

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Lastly, to calculate ‘priced-out’ figures, we utilized the methodology developed by NAHB. They utilize the income distribution tables from the U.S. Census Bureau to identify the percentage of households that can afford to purchase a median-priced home. Using the same data tables, we can assess how many households are priced-out for each additional $1,000 added to the price of a home.

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Limitations

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Limitations to our findings include the following:

• Interest rates continue to rise each day, and it’s anticipated that the Federal Reserve will increase interest rates further as 2022 progresses. This reduces the buying power of potential home buyers because as rates rise, higher-priced homes will fall out of reach for many buyers.
• We pulled the data to run computations on April 20, 2022. If home appreciation continues to rise at historical levels, the housing attainability crisis will continue to get worse.
• Property taxes and insurance rates used in computations were averages. That means for any given county, attainability of homeownership could be worse or better based on the county’s property tax rate and the area’s insurance rate.

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