Shortages of buildable lots and skilled labor, excessive regulations, rising mortgage interest rates and ongoing home price appreciation pushed housing affordability in the fourth quarter of 2016 to its lowest point since the third quarter of 2008, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI), released today.
In all, 59.9% of new and existing homes sold between the beginning of October and end of December were affordable to families earning the median income of $65,700. This is down from the 61.4% of homes sold that were affordable to median-income earners in the third quarter.
“Though builders remain confident that housing markets across the nation will continue to show gradual improvement in the year ahead, they remain concerned that regulatory constraints and lot and labor supply issues are preventing a more robust recovery,” said NAHB Chairman Granger MacDonald. “The rising costs of construction as it relates to land and labor are putting upward pressure on home prices.”
“Affordability remains positive nationwide even as demand is outstripping supply in many markets,” said NAHB Chief Economist Robert Dietz. “Though mortgage rates are rising, incomes should rise faster as well, helping to keep home prices affordable. Meanwhile, policymakers at all levels of government must address regulatory burdens that are raising housing costs while officials at the state and local level need to take steps to put more lots in the pipeline to help offset future price growth.”
The national median home price increased from $247,000 in the third quarter to $250,000 in the fourth quarter. Meanwhile, average mortgage rates edged higher,from 3.76% to 3.84%.
Youngstown-Warren-Boardman, Ohio-Pa., was rated the nation’s most affordable major housing market, where 90.4% of all homes sold in the fourth quarter were affordable to families earning the area’s median income of $53,900. Meanwhile, Fairbanks, Alaska, was once again rated the nation’s most affordable smaller market, with 95.1% of homes sold affordable to families earning the median income of $93,800.
For the 17th consecutive quarter, San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 7.8% of homes sold were affordable to families earning the area’s median income of $104,700.
At the very bottom of the affordability chart among smaller markets was Salinas, California, where 15.2% of all homes sold were affordable to families earning the area’s median income of $63,500.
Please visit nahb.org/hoi for tables, historic data and details.