Affordability has improved but homebuyers still face barriers

by Steve Randall10 May 2019

Home price appreciation slowed, mortgage rates dipped, but many potential homebuyers were still left on the sidelines in the first quarter of 2019.

And that’s because inventory remains low especially among starter homes, restricting home-hungry first-time buyers from making the move into ownership.

Figures from the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) show that 61.4% of new and existing homes sold between the beginning of January and end of March were affordable to families earning the US median income of $75,500.

That was up from 56.6% in the last quarter of 2018 but little changed from Q1 2018 when it was 61.6%.

“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,” said NAHB Chairman Greg Ugalde. “This means that housing affordability is going to continue to be a challenge throughout 2019, particularly in high-cost markets.”

Most affordable markets
Leading the most affordable market in the US is Youngstown-Warren-Boardman, Ohio-Pa.

It’s the second straight quarter that the market has ranked most affordable and in Q1 2019 families earning the median income of $59,800 could afford 93.3% of all new and existing homes sold.

Among smaller markets, Fairbanks, Alaska, was top with 94.7% of homes sold in the first quarter being affordable to families earning the median income of $92,400.

San Francisco was the nation’s least affordable major market for the sixth consecutive quarter with just 6.9% of the homes sold in the first quarter of 2019 affordable to families earning the area’s median income of $122,200.

All five least affordable small housing markets were also in the Golden State; the worst being Salinas, where just 12.6% of all new and existing homes sold were affordable to families earning the area’s median income of $74,100.

“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,” said NAHB Chief Economist Robert Dietz. “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.”

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