Housing affordability remains at a 10-year low

Changes in home prices, mortgage rates made little difference in Q4 2018

Housing affordability remains at a 10-year low

A modest decline in home prices, offset by a moderate rise in mortgage rates, meant housing affordability was little changed in the last three months of 2018.

The National Association of Home Builders/Wells Fargo Housing Opportunity Index released Thursday shows that 56.6% of all new and existing homes sold in Q4 2018 were affordable for those earning the US median income of $71,900. In Q3 the figure was 56.4%.

The report notes that the US median home price in the fourth quarter was $263,000, down from $268,000 in the third quarter; the average mortgage rate increased to 4.89% from 4.72% during the same period.

“While solid job growth and rising household formations are fueling a demand for housing, home price appreciation has outpaced wage gains, putting a damper on housing affordability,” said NAHB Chief Economist Robert Dietz. “To keep housing moving forward, policymakers at all levels of government should make it a priority to address affordability concerns that are hurting home buyers and home builders alike.”

What was the most, least affordable market?
There was a new frontrunner for housing affordability in the fourth quarter of 2018; Youngstown-Warren-Boardman, Ohio-Pa., where 97% of homes were affordable on the area’s median income of $60,100. It replaced Syracuse, NY.

San Francisco, for the fifth straight quarter, was the nation’s least affordable major market. There, just 6% of the homes sold in the fourth quarter of 2018 were affordable to families earning the area’s median income of $116,400.

NAHB Chairman Randy Noel says that policymakers need to take notice of the affordability issues.

“Builders are finding it increasingly difficult to build at price points most consumers need because they are struggling with burdensome regulations, higher material costs and shortages of lots and labor,” he said. “Historically, housing has been the canary in the coal mine, and these ongoing affordability woes should serve as a wake-up call to policymakers to take immediate action.”