National housing affordability fell in the second quarter for the first time in five years, according to a National Association of Home Builders/Wells Fargo report released Tuesday.
According to the NAHB/Wells Fargo Housing Opportunity Index, families earning the U.S. median income of $64,400 could afford 69.3% of new and existing homes sold between the beginning of April and the end of June. That’s down from 73.7% in Q1, and the first time since late 2008 that the measure has fallen below 70%, according to the NAHB.
“Housing affordability has been hovering near historic highs for the past several years, largely due to exceptionally favorable mortgage rates and low prices during the recession,” said NAHB Chairman Rick Judson. “Now that markets across the country are recovering, home values are strengthening at the same time that the cost of building homes is rising due to tightened supplies of building materials, developable lots and labor.”
“Rising home prices signal the improving health in housing markets, and the median price of all new and existing U.S. homes sold in this year’s second quarter, at $202,000, was well ahead of the second quarter 2012 median price of $185,000,” said NAHB Chief Economist David Crowe. “Together with rising mortgage rates, this contributed to affordability slipping to the lowest level in more than four years. Such movement would be less concerning were it not for ongoing discussions regarding potential changes to the mortgage interest deduction and federal support for the secondary mortgage market, both of which play enormous roles in keeping homeownership affordable.”
The least affordable home markets in the country in Q2 were all in California, according to the NAHB. The least affordable market of all was the Santa Cruz-Watsonville area, where only 30% of all new and existing homes sold were affordable to families earning the area’s median income of $73,800.