Slower growth in the housing market, including modest home price increases and falling interest rates, are diminishing the affordability issue it the U.S.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released Thursday showed that nationwide housing affordability in the fourth quarter of 2015 increased slightly.
According to the report, 63.3 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $65,800. This percentage is up from 62.2 percent affordable homes in the third quarter.
Home prices also helped the affordability crisis, falling from $231,000 in the third quarter to $226,000 in the fourth quarter. Meanwhile, average mortgage rates decreased from 4.18 percent to 4.09 percent in the same period.
“Affordable home prices, attractive mortgage rates, and pent-up demand are keeping the housing market on a gradual, upward path,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois. “While this bodes well for housing in 2016, builders continue to face a number of challenges, including excessive and costly regulations and a lack of available lots and skilled labor.”
The most affordable housing market is Youngstown-Warren-Boardman, Ohio-Pennsylvania, with 90.1 percent of all new and existing homes sold in the fourth quarter affordable to families earning the area’s median income of $53,700, the data showed. Syracuse, New York fell to second place in the fourth quarter after holding the top spot in the previous quarter.
NAHB's Most Affordable Major Housing Markets:
- Youngstown-Warren-Boardman, Ohio-Pennsylvania
- Syracuse, New York
- Scranton-Wilkes-Barre, Pennsylvania
- Toledo, Ohio
- Columbia, South Carolina
To no surprise, all five least affordable major housing markets were in California. The data found that San Francisco-San Mateo-Redwood City, California was the nation’s least affordable major housing market for the 13th consecutive quarter. Here, only 10.4 percent of homes were affordable to families earning the area’s median income of $103,400.
Wrapping up the bottom five least affordable markets in California are: Los Angeles-Long Beach-Glendale; Santa Ana-Anaheim-Irvine; San Jose-Sunnyvale-Santa Clara; and Santa Rosa-Petaluma.
“The signs point to continuing growth in home sales,” said NAHB Chief Economist David Crowe. “We’ve seen an improvement in affordability due to favorable home prices and interest rates. Steady employment and economic growth, along with rising consumer confidence and pent-up demand will also help encourage more buyers to enter the marketplace.”'
Click here to read the full report.