Higher rates and prices contribute to affordability concerns
Housing affordability stayed at a 10-year low during the third quarter amid modest increases in interest rates and home prices, according to the Housing Opportunity Index released by the National Association of Home Builders (NAHB) and Wells Fargo.
The index found that families earning the $71,900 US median income could afford only 56.4% of new and existing homes sold between the beginning of July and end of September. This is the lowest reading since mid-2008. Also, the share is down compared to the 57.1% of homes sold in the second quarter that were affordable to median-income earners.
The decline in affordability came as quarterly median prices reached their highest level in the history of the index. The national median home price edged up to $268,000 in the third quarter from $265,000 in the second quarter. At the same time, average mortgage rates rose by a nominal five basis points in the third quarter to 4.72% from 4.67% in the second quarter.
“Continuing home price appreciation and rising interest rates coupled with persistent labor shortages are contributing to housing affordability concerns,” NAHB Chairman Randy Noel said. “Builders are increasingly focusing on managing home construction costs so that they do not outpace wage gains.”
“Ongoing job and economic growth provide a solid backdrop for housing demand amid recent declines in affordability,” NAHB Chief Economist Robert Dietz said. “However, housing affordability will need to stabilize to keep forward momentum from diminishing as we move into the new year.”
For the fourth consecutive quarter, San Francisco was the least affordable major market in the US. The index revealed that only 6.4% of the homes sold in the third quarter were affordable to families earning the area’s median income of $116,400.
