Housing Affordability Holds Steady on a Year-Over-Year Basis

Window & Door
May 9, 2019
Markets

Lower home prices, declining mortgage rates and solid income gains contributed to a rise in housing affordability in the first quarter of 2019, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. However, the HOI was little changed on a year-over-year basis, as home buyers continue to face ongoing challenges in terms of limited inventory, especially among starter homes for prospective first-time buyers.

In all, 61.4 percent 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 $75,500. This is up from the 56.6 percent of homes sold in the fourth quarter of 2018 that were affordable to median-income earners and relatively unchanged compared to a first quarter 2018 reading of 61.6 percent.

As home price gains slowed during 2018, the national median home price moved down from $262,500 in the fourth quarter of 2018 to $260,000 in the first quarter of 2019. At the same time, average mortgage rates fell in the first quarter of 2019 to 4.64 percent from 4.89 percent in the fourth quarter of 2018.

"While the recent rise in affordability is welcome news, builders continue to struggle with rising construction and development costs stemming from excessive regulations, a lack of buildable lots and a shortage of construction workers," says Greg Ugalde, NAHB chairman. "This means that housing affordability is going to continue to be a challenge throughout 2019, particularly in high-cost markets."

"Though the Federal Reserve's more dovish monetary policy stance has lowered interest rates, income growth still has not kept up with rising construction costs and home price appreciation in recent years," says Robert Dietz, NAHB chief economist. "Today four out of every 10 new and existing home sales are not affordable for a typical family. Considering recent income gains due to tax reform and a tight labor market, these affordability concerns become even more pronounced."