Housing Affordability Edges Lower in the Third Quarter

National Association of Home Builders
November 13, 2018
A modest increase in interest rates and home prices kept housing affordability at a 10-year low in the third quarter of 2018, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
In all, 56.4 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $71,900. This is down from the 57.1 percent of homes sold in the second quarter that were affordable to median-income earners and the lowest reading since mid-2008.
The national median home price edged up from $265,000 in the second quarter of 2018 to $268,000 in the third quarter. This is the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates rose nominally in the third quarter to 4.72 percent from 4.67 percent in the second quarter.
“Continuing home price appreciation and rising interest rates coupled with persistent labor shortages are contributing to housing affordability concerns,” says Randy Noel, a custom home builder and NAHB chairman. “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,” says Robert Dietz, NAHB chief economist. “However, housing affordability will need to stabilize to keep forward momentum from diminishing as we move into the new year.”
For the second straight quarter, Syracuse, New York, remained as the nation’s most affordable major housing market. There, 88.2 percent of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $74,100. Meanwhile, Kokomo, Indiana, was rated the nation’s most affordable smaller market, with 93.2 percent of homes sold in the third quarter being affordable to families earning the median income of $64,100.
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