NAHB/Wells Fargo Gauge Housing Affordability at a 10-Year Low

November 8th, 2018 by Drew Vass, Executive Editor

Partly due to increases in interest rates and home prices, the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) shows housing affordability at a 10-year low in the third quarter (3Q) 2018.

Based on families with a U.S. median income of $71,900 annually, newly released data ranks 56.4 percent of both new and existing homes sold in the 3Q as “affordable,” a number that’s down from 57.1 percent in the previous quarter, which was the lowest reading since 2008.

The national median home price has increased slightly from the second quarter (2Q), reading at $268,000 versus $265,000. According to NAHB, this is the highest quarterly median price in the history of the HOI. Mortgage rates rose to 4.72 percent in the 3Q, versus 4.67 percent in the 2Q.

“Continuing home price appreciation and rising interest rates coupled with persistent labor shortages are contributing to housing affordability concerns,” says NAHB chairman Randy Noel. “Builders are increasingly focusing on managing home construction costs so that they do not outpace wage gains.”

Syracuse, N.Y., clocks in as the nation’s most affordable major housing market, where 88.2 percent of homes sold in the 3Q were affordable, based on the area’s median income of $74,100.

Kokomo, Ind., Follows as the nation’s most affordable smaller housing market, where 93.2 percent of homes sold in the 3Q were considered affordable based on that area’s median income of $64,100.

Overall, the top five affordable major housing markets in the U.S. includes Scranton-Wilkes Barre-Hazleton, Pa.; Indianapolis-Carmel-Anderson, Ind.; Youngstown-Warren-Boardman, Ohio-Pa.; and Harrisburg-Carlisle, Pa.

NAHB reports that the smaller markets joining Kokomo at the top of the list include Elmira, N.Y.; Fairbanks, Alaska; Cumberland, Md.-W.Va.; and Springfield, Ohio.

San Francisco remains the nation’s least affordable major market, with only 6.4 percent of homes sold in the 3Q being affordable to the area’s median income of $116,400.

In fact, California claims many major areas toward the bottom of the list. In descending order, they include Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad.

“Ongoing job and economic growth provide a solid backdrop for housing demand amid recent declines in affordability,” says NAHB chief economist Robert Dietz. “However, housing affordability will need to stabilize to keep forward momentum from diminishing as we move into the new-year.”

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