Housing Affordability Edges Lower in 3rd Quarter

Filed in Economics, Home Building by on November 10, 2016 0 Comments

for sale signOngoing home price appreciation offset a small decline in mortgage interest rates to move housing affordability slightly lower in the third quarter of 2016, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) released today.

“Historically low interest rates and firming job growth are positive indicators that housing markets across the nation will continue to gradually improve,” said NAHB Chairman Ed Brady. “Home prices, however, continue to be affected by the rising costs of construction, both in terms of land and labor.”

In all, 61.4% of new and existing homes sold between the beginning of July and end of September were affordable to families earning the median income of $65,700. This is down from 62% in the second quarter.

“Regulatory restraints along with shortages of buildable lots and skilled workers are adding to the cost of new homes, which is putting upward pressure on home prices,” said NAHB Chief Economist Robert Dietz. “Though these factors have negatively affected the marketplace, affordability still remains positive. Moreover, attractive mortgage rates, rising incomes and growing household formations make this an excellent time to buy.”

The national median home price increased from $240,000 in the second quarter to $247,000 in the third. Meanwhile, average mortgage rates edged lower from 3.88% to 3.76%.

Elgin, Ill., was rated the nation’s most affordable major housing market, where 94.3% of all new and existing homes sold in this year’s third quarter were affordable to families earning the area’s median income of $82,500. Meanwhile, Fairbanks, Alaska, was rated the nation’s most affordable smaller market, with 97.7% of homes sold affordable to families earning the median income of $93,800.

Rounding out the top five affordable major housing markets Youngstown-Warren-Boardman, Ohio-Pa.; Scranton-Wilkes-Barre-Hazleton, Pa.; Indianapolis-Carmel-Anderson, Ind.; and Syracuse, N.Y.

Smaller markets joining Fairbanks at the top of the list included Monroe, Mich.; Binghamton, N.Y.; Wheeling, W.Va.-Ohio; and Davenport-Moline-Rock Island, Iowa-Ill.

For the 16th consecutive quarter, San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 9.7% of homes sold were affordable to families earning the area’s median income of $104,700.

Other major metros at the bottom of the affordability chart were all in California. In descending order, they included Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and Santa Rosa.

Four of the five least affordable small housing markets were also in California. At the very bottom of the affordability chart was Salinas, where 17.6% of all new and existing homes sold were affordable to families earning the area’s median income of $63,500.

In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; Napa; San Luis Obispo-Paso Robles-Arroyo Grande; and Kahului-Wailuku-Lahaina, Hawaii.

Please visit nahb.org/hoi for tables, historic data and details.

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