The National Association of Home Builders’ 3Q affordability study found that just 37.4% of Americans can afford a median-priced home in their metro area.
WASHINGTON – Rising mortgage rates, elevated construction costs and limited existing inventory helped push housing affordability in the third quarter (3Q) of 2023 to its lowest level in more than a decade, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
Just over one in three Americans (37.4%) could afford a new or existing home in 3Q (July through September), which required a median income of $96,300. That’s down from 40.5% in 2Q and the lowest reading since NAHB began consistently tracking affordability in 2012.
“Steadily rising interest rates since the beginning of the year are taking a toll on housing affordability by raising housing costs for buyers and increasing the cost of development and construction loans for builders,” says NAHB Chairman Alicia Huey.
“Rising mortgage rates have clearly been the key cause of declining housing affordability conditions and shelter costs have been the main driver of inflation,” says NAHB Chief Economist Robert Dietz. “And with shelter cost increases driven by a lack of affordable supply and increasing development costs, the best way to tackle America’s growing housing affordability challenges is to enact policies that will allow builders to increase the housing supply.”
The HOI found that the national median home price held steady at $388,000 in the third quarter, unchanged from the previous quarter. But average mortgage rates jumped from 6.59% in the second quarter up to 7.13% in the third quarter – the highest rate in the HOI series history.
Most affordable markets in 3Q
Lansing-East Lansing, Mich., was the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. There, 79.8% of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $97,800.
Top five affordable major housing markets:
- Lansing-East Lansing, Mich.
- Youngstown-Warren-Boardman, Ohio-Pa.
- Harrisburg-Carlisle, Pa.
- Indianapolis-Carmel-Anderson, Ind.
- Scranton-Wilkes-Barre, Pa.
Cumberland, Md.-W.Va., was rated the nation’s most affordable small market, with 93.7% of homes sold in the third quarter being affordable to families earning the median income of $89,900.
Top five affordable small housing markets:
- Cumberland, Md.-W.Va.
- Elmira, N.Y.
- Bay City, Mich.
- Davenport-Moline-Rock Island, Iowa-Ill.
- Kokomo, Ind.
Least affordable housing markets
For the 12th straight quarter, Los Angeles-Long Beach-Glendale, Calif., remained the nation’s least affordable major housing market. There, just 2.7% of the homes sold during the third quarter were affordable to families earning the area’s median income of $98,200.
Top five least affordable major housing markets – all in California:
- Los Angeles-Long Beach-Glendale
- Anaheim-Santa Ana-Irvine
- San Diego-Chula Vista-Carlsbad
- Oxnard-Thousand Oaks-Ventura
- San Francisco-San Mateo-Redwood City
The top five least affordable small housing markets were also in California. At the very bottom of the affordability chart was Napa, Calif., where 4.2% of all new and existing homes sold in the third quarter were affordable to families earning the area median income of $129,600.
Top five least affordable small housing markets–all located in California:
- Santa Maria-Santa Barbara
- San Luis Obispo-Paso Robles
- Santa Cruz-Watsonville
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