Photo: A. Strakey/Flickr
Firming home prices in many markets across the US resulted in a nationwide dip in housing affordability in the second quarter, according to a report published late last week by the National Association of Home Builders (NAHB) and Wells Fargo.
The Housing Opportunity Index (HOI) measures the number of homes sold in a particular area that are affordable to families earning the median income for the area. The index is published quarterly by NAHB and Wells Fargo.
The second quarter report found that affordability of new and existing homes dropped just over three percent from the first to second quarter. 63.2 percent of new and existing homes that were sold between the beginning of April and the end of June were affordable to families earning the US median income of $65,800. In the previous quarter, 66.5 percent of homes sold were affordable to median-income earners.
While mortgage rates actually dipped lower from 4.03 percent to 3.99 percent in the same period, the positive effects of the lower rates were countered by rising prices. The national median home price increased from $210,000 in the first quarter to $230,000 in the second quarter.
NAHB Chairman Tom Woods, a home builder from Blue Springs, MO, said that this is a good sign.
“Home price appreciation in many markets across the nation are a sign that the housing recovery continues to move forward,” he said. “At the same time, the cost of building a home is rising due to higher costs for buildable lots and skilled labor.”
Economists are quick to point out that this is not necessarily a cause for alarm. NAHB Chief Economist David Crowe said things are still looking up in housing.
“Though affordability edged slightly lower in the second quarter, the HOI remains well above 50, where half the households can afford half the homes sold,” he said. “Low mortgage rates, pent-up demand and continued job growth should contribute to a gradual, steady rise in housing throughout the year.”
The San Francisco-San Mateo Redwood City area was the least affordable market in the United States for the eleventh quarter in a row. Only 11 percent of homes sold in the quarter were considered affordable to families earning the area’s median income.
Other markets rounding out the bottom of the affordability list include the usual suspects: Los Angeles and New York.