Housing Affordability Holds Steady at a 10-year Low in Q4 2018

Window & Door
February 14, 2019
Markets

A modest increase in interest rates offset a slight decline in home prices to keep housing affordability essentially level in the fourth quarter of 2018 and still hovering at a 10-year low, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).

In all, 56.6 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $71,900. This is little changed from the 56.4 percent of homes sold in the third quarter that were affordable to median-income earners.

The national median home price moved down from $268,000 in the third quarter of 2018 to $263,000 in the fourth quarter. At the same time, average mortgage rates rose by 17 basis points in the fourth quarter to 4.89 percent from 4.72 percent in the third quarter. This was the fourth straight quarterly rate hike and the highest rate level since the second quarter of 2011.

"Builders are finding it increasingly difficult to build at price points most consumers need because they are struggling with burdensome regulations, higher material costs and shortages of lots and labor," says NAHB Chairman Randy Noel, a custom home builder from LaPlace, Louisiana. "Historically, housing has been the canary in the coal mine, and these ongoing affordability woes should serve as a wakeup call to policymakers to take immediate action."

"While solid job growth and rising household formations are fueling a demand for housing, home price appreciation has outpaced wage gains, putting a damper on housing affordability," says NAHB Chief Economist Robert Dietz. "To keep housing moving forward, policymakers at all levels of government should make it a priority to address affordability concerns that are hurting home buyers and home builders alike."