Housing affordability dipped in the second quarter as rising home prices offset a quarter-point drop in mortgage interest rates, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index.
Between the beginning of April and end of June, 59.4% of new and existing homes that were sold were affordable to families earning the U.S. median income of $68,000. Three months earlier, 60.3% of homes were affordable to median-income earners in the first quarter.
“The job market continues to gain steam and this is boosting housing demand,” said NAHB Chief Economist Robert Dietz. “Meanwhile, growing incomes and attractive mortgage rates are helping to keep housing affordable by partially offsetting ongoing home price appreciation. Home prices will continue to rise as inventory remains tight. NAHB expects the housing market will continue to make gradual gains in 2017.”
The national median home price rose to $256,000 in the second quarter of 2017, up from $245,000 in the first quarter. At the same time, average mortgage rates fell 25 basis points in the second quarter to 4.08%.
For the third consecutive quarter, Youngstown-Warren-Boardman, Ohio-Pa., was rated the nation’s most affordable major housing market, with 93.3% of all new and existing homes sold in the second quarter being affordable for families earning the area’s median income of $54,600.
Kokomo, Ind., was rated the nation’s most affordable smaller market for the second straight quarter, with 96.9% of homes sold in the second quarter being affordable to families earning the median income of $62,500.
Rounding out the top five affordable major housing markets in respective order were Syracuse, N.Y.; Dayton, Ohio; Buffalo-Cheektowaga-Niagara Falls, N.Y.; and Scranton-Wilkes Barre-Hazleton, Pa.
Smaller markets joining Kokomo at the top of the list included Davenport-Moline-Rock Island, Iowa-Ill.; Glen Falls, N.Y.; Watertown-Fort Drum, N.Y.; and Monroe, Mich.
The least affordable
San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market for the 19th consecutive quarter. There, just 7.6% of homes sold in the second quarter were affordable to families earning the area’s median income of $113,100.
Other major metros at the bottom of the affordability chart were located in California. In descending order, they included Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and Santa Rosa.
All five least affordable small housing markets were also in California. At the very bottom of the affordability chart was Salinas, where 12.4% of all new and existing homes sold were affordable to families earning the area’s median income of $63,100.
Other small markets at the lowest end of the affordability scale included -- in descending order -- Santa Cruz-Watsonville; San Rafael; Napa; and San Luis Obispo-Paso Robles-Arroyo Grande.
“While builder confidence remains solid and sales and starts are running at a healthy clip above last year’s levels, housing continues to confront persistent headwinds,” said NAHB Chairman Granger MacDonald. “Rising material prices, particularly lumber, along with chronic shortages of buildable lots and skilled labor are putting upward pressure on home prices and impeding a more robust housing recovery.”