NAHB: Housing affordability holds its own
WASHINGTON – May 9, 2019 – Lower home prices, declining mortgage rates and solid income gains contributed to a rise in housing affordability in the first quarter of 2019, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
However, the HOI changed little on a year-over-year basis, as homebuyers continue to face ongoing challenges in terms of limited inventory, especially among starter homes for prospective first-time buyers.
In all, 61.4 percent of new and existing homes sold in the January through March quarter were affordable to families earning the U.S. median income of $75,500. That's up from the 56.6 percent of homes sold in the fourth quarter of 2018 affordable to median-income earners and relatively unchanged compared to first quarter 2018 (61.6 percent).
As home price gains slowed during 2018, the national median home price moved down from $262,500 in the fourth quarter of 2018 to $260,000 in the first quarter. At the same time, average mortgage rates fell by 25 basis points in the first quarter to 4.64 percent from 4.89 percent in the fourth quarter.
"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," says NAHB Chairman Greg Ugalde. "This means that housing affordability is going to continue to be a challenge throughout 2019, particularly in high-cost markets."
"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," adds 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."
For the second consecutive quarter, Youngstown-Warren-Boardman, Ohio-Pa., remained as the nation's most affordable major housing market. There, 93.3 percent of all new and existing homes sold in the first quarter were affordable to families earning the area's median income of $59,800. Meanwhile, Fairbanks, Alaska, was rated the nation's most affordable smaller market, with 94.7 percent of homes sold in the first quarter being affordable to families earning the median income of $92,400.
San Francisco, for the sixth straight quarter, was the nation's least affordable major market. There, just 6.9 percent of the homes sold in the first quarter of 2019 were affordable to families earning the area's median income of $122,200.
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