Rising Incomes Boost Housing Affordability in 1st Quarter

Filed in Economics by on May 10, 2018 1 Comment

house plus moneyStrong wage growth more than offset an increase in mortgage interest rates to boost nationwide housing affordability in the first quarter of 2018, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) released today.

 In all, 61.6% of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $71,900. This is up from the 59.6% in the fourth quarter of 2017.

“Continued job growth, rising wages and strong consumer confidence are fueling housing demand. In turn, this should lead to more buyers entering the housing market in the coming months,” said NAHB chairman Randy Noel. “However, builders continue to face chronic labor and lot shortages, rising prices for building materials and excessive regulations.”

“At the national level, median family income rose an impressive 5.7% to $71,900 in 2018 from $68,000 last year, and this wage growth helped to boost housing affordability,” said NAHB chief economist Robert Dietz. “A growing economy, along with tight inventories and increasing household formations, will lift housing production in the year ahead. But we also expect mortgage rates to continue to rise, and this will place downward pressure on affordability.”

Average mortgage rates jumped by nearly 30 basis points to 4.34% from 4.06% in the fourth quarter of 2017.

Of the 237 metropolitan areas recorded in the first quarter HOI, 167 markets registered a gain in affordability from the fourth quarter of 2017, 68 posted a loss and two were unchanged.

Youngstown-Warren-Boardman, Ohio-Pa., was the nation’s most affordable major housing market. There, 90.9% of all new and existing homes sold were affordable to families earning the area’s median income of $60,100. Meanwhile, Cumberland, Md.-W.Va., was rated the nation’s most affordable smaller market, with 98.5% of homes sold in the first quarter being affordable to families earning the median income of $55,500.

Rounding out the top five affordable major housing markets in respective order were Indianapolis-Carmel-Anderson, Ind.; Scranton-Wilkes Barre-Hazleton, Pa.; Toledo, Ohio; and Harrisburg-Carlisle, Pa.

Smaller markets joining Cumberland at the top of the list included Springfield, Ohio; Elmira, N.Y.; Wheeling, W.Va.-Ohio; and Fairbanks, Alaska, which also posted a fifth place tie with Binghamton, N.Y.

San Francisco, for the second straight quarter, was the nation’s least affordable major market. There, just 9.2% of the homes sold in the first quarter were affordable to families earning the area’s median income of $119,600.

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

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 10.7% of all new and existing homes sold were affordable to families earning the area’s median income of $69,100.

In descending order, other small markets at the lowest end of the scale were Santa Cruz-Watsonville, San Luis Obispo-Paso Robles-Arroyo Grande, Napa, and San Rafael.

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

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  1. Harry Crowell says:

    Please use your influence to slow down or stop all of the new and unnecessary additional fees, extractions and taxes on new housing; the prices of new houses seems to increase faster than income does. Please remember the actual cost of these fees and increases in material add an additional 40% to the homebuyer by the time escrow closes.

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