Housing affordability was down slightly in the third quarter as rising home prices offset a dip in mortgage interest rates.
According to the National Association of Home Builders (NAHB/Wells Fargo) Housing Opportunity Index, 61.4 % of new and existing homes sold in the July-September period were affordable to families earning the U.S. median income of $65,700. In the previous three-month time frame, 62% of homes were affordable.
“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.”
The national median home price increased from $240,000 in the second quarter to $247,000 in the third quarter, as average mortgage rates slipped from 3.88% to 3.76% in the same period.
Most affordable markets
Elgin, Ill., was rated the nation’s most affordable major housing market, where 94.3% of all new and existing homes sold in third quarter were affordable to families earning the area’s median income of $82,500. Fairbanks, Alaska, was rated the nation’s most affordable smaller market, with 97.7% of homes affordable to families earning the median income of $93,800.
Rounding out the top five affordable major housing markets in respective order were Youngstown-Warren-Boardman, Ohio-Pa.; Scranton-Wilkes-Barre-Hazleton, Pa.; Indianapolis-Carmel-Anderson, Ind.; and Syracuse, N.Y.
Smaller markets joining Fairbanks at the top of the list included Monroe, Mich.; Binghamton, N.Y.; Wheeling, W.Va.-Ohio; and Davenport-Moline-Rock Island, Iowa-Ill.
Least affordable markets
For the 16th straight quarter, San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 9.7% of homes sold in the third quarter were affordable to families earning the area’s median income of $104,700.
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.
Four of the five least affordable small housing markets were also in California. At the very bottom of the affordability chart was Salinas, where 17.6% of all new and existing homes sold were affordable to families earning the area’s median income of $63,500.
In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; Napa; San Luis Obispo-Paso Robles-Arroyo Grande; and Kahului-Wailuku-Lahaina, Hawaii.