Housing affordability reaches 10-year low
Housing affordability has reached its worst reading in a decade.
Rising home prices and interest rates have helped push housing affordability to a 10-year low in the second quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
In all, 57.1% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $71,900. This is down from the 61.6% of homes sold in the first quarter that were affordable to median-income earners and the lowest reading since mid-2008.
The national median home price jumped from $252,000 in the first quarter of 2018 to $265,000 in the second quarter—the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates jumped by more than 30 basis points in the second quarter to 4.67% from 4.34% in the first quarter.
“Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Meanwhile, tariffs on Canadian lumber imports into the U.S. are further eroding housing affordability. Builders are struggling to manage these costs to ensure pricing does not outpace expected gains in wage growth.”
NAHB Chief Economist Robert Dietz said several catalysts will continue to push housing demand for the remainder of the year. But it might not be enough to combat the rising cost of housing.
“Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018,” Dietz said. “However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability.”
Syracuse, N.Y., was the nation’s most affordable major housing market, according to the HOI. There, 89.1% of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $74,100. Meanwhile, the nation’s most affordable smaller market was also located in the Empire State. In Elmira, N.Y., 97% of homes sold in the second quarter were affordable to families earning the median income of $71,000.
Rounding out the top five affordable major housing markets in respective order were Scranton-Wilkes Barre-Hazleton, Pa.; Harrisburg-Carlisle, Pa; Indianapolis-Carmel-Anderson, Ind.; and Youngstown-Warren-Boardman, Ohio-Pa.
Rising home prices and interest rates have helped push housing affordability to a 10-year low in the second quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
In all, 57.1% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $71,900. This is down from the 61.6% of homes sold in the first quarter that were affordable to median-income earners and the lowest reading since mid-2008.
The national median home price jumped from $252,000 in the first quarter of 2018 to $265,000 in the second quarter—the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates jumped by more than 30 basis points in the second quarter to 4.67% from 4.34% in the first quarter.
“Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Meanwhile, tariffs on Canadian lumber imports into the U.S. are further eroding housing affordability. Builders are struggling to manage these costs to ensure pricing does not outpace expected gains in wage growth.”
NAHB Chief Economist Robert Dietz said several catalysts will continue to push housing demand for the remainder of the year. But it might not be enough to combat the rising cost of housing.
“Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018,” Dietz said. “However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability.”
Syracuse, N.Y., was the nation’s most affordable major housing market, according to the HOI. There, 89.1% of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $74,100. Meanwhile, the nation’s most affordable smaller market was also located in the Empire State. In Elmira, N.Y., 97% of homes sold in the second quarter were affordable to families earning the median income of $71,000.
Rounding out the top five affordable major housing markets in respective order were Scranton-Wilkes Barre-Hazleton, Pa.; Harrisburg-Carlisle, Pa; Indianapolis-Carmel-Anderson, Ind.; and Youngstown-Warren-Boardman, Ohio-Pa.