Housing affordability fell in the third quarter, driven largely by rising land and labor costs, according to new data released by the National Association of Home Builders.
According to the NAHB/Wells Fargo Housing Opportunity Index, 61.4% of new and existing homes sold during the third quarter were affordable to families earning the national median income of $65,700. That’s down from 62% in the second quarter. The median home price was up from Q2’s $240,000 to $247,000 in the third quarter.
“Historically low interest rates and firming job growth are positive indicators that housing markets across the nation will continue to gradually improve,” said NAHB Chairman Ed Brady. “Home prices, however, continue to be affected by the rising costs of construction, both in terms of land and labor.”
“Regulatory restraints along with shortages of buildable lots and skilled workers are adding to the cost of new homes, which is putting upward pressure on home prices,” said Robert Dietz, NAHB chief economist. “Though these factors have negatively affected the marketplace, affordability still remains positive. Moreover, attractive mortgage rates, rising incomes and growing household formations make this an excellent time to buy.”
Elgin, Ill., was the nation’s most affordable major housing market in the third quarter, according to the NAHB. In Elgin, 94.3% of all homes were affordable to families earning the area’s median income. Fairbanks, Alaska, was the nation’s most affordable smaller market, with 97.7% of all homes being affordable to families earning the median income.
The San Francisco area was the nation’s least affordable major market for the 16th straight quarter, according to the NAHB. In San Francisco and its environs, just 9.7% of homes sold in the third quarter were affordable to families earning the area’s median income.