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Home Affordability Inches Up in Q4

Home-MoneyCooldowns in home price growth and a downturn in interest rates helped lift home affordability levels for median income households in the fourth quarter, the National Association of Home Builders (NAHB) said Thursday.

Using home price data from CoreLogic, NAHB estimated that 62.8 percent of homes sold at the national median price were affordable to families earning the U.S. median income of $63,900. That figure was up 1 percentage point from the third quarter.

Much of that increase can be attributed to a slide in the national median home price, which fell more than $5,000 to $215,000 in Q4. Meanwhile, the average mortgage interest rate (as reported by the Federal Housing Finance Agency) slipped to 4.29 percent from 4.35 percent in Q3.

Arriving days after the group reported a decline in homebuilder confidence for February, the increase may come as welcome news for builders concerned about current buyer activity levels.

"This upturn in affordability for the final quarter of 2014 is a positive development and is in line with what we are hearing from builders in the field that more prospective buyers are starting to move forward in the marketplace," said NAHB Chairman Tom Woods.

In the year ahead, the association expects to see more affordable prices and continued improvements in the job market, which is anticipated to release pent-up demand from buyers holding back because of cost.

Syracuse, New York, took the title of nation's most affordable major housing market in Q4, with more than nine in ten homes—both new and existing—deemed affordable to families earning the local median income of $67,700.

The other top markets for affordability were concentrated in the Midwest, including Akron, Ohio; Dayton, Ohio; Harrisburg-Carlisle, Pennsylvania; and Scranton-Wilkes-Barre, Pennsylvania.

Among smaller markets, Cumberland, Maryland-West Virginia, topped the affordability charts, with 96.2 percent of homes sold last quarter falling within the affordability range for the median household income of $54,100.

At the other end of the scale, California's San Francisco-San Mateo-Redwood City was declared the country's least affordable major housing market for the ninth consecutive quarter. Just 11.1 percent of homes sold in Q4 were affordable to families earning the area's six-figure median income: $100,400.

San Francisco was joined at the bottom by Los Angeles-Long Beach-Glendale, Santa Ana-Anaheim-Irvine, San Jose-Sunnyvale-Santa Clara, and New York-White Plains-Wayne—the last of which was the only non-California market to rank in the bottom five.

Looking at smaller markets, all five least affordable areas were in the Golden State, with Napa taking the bottom spot (with only 12 percent of sold homes being affordable for a median household income of $70,300). Other small markets included Santa-Cruz Watsonville, Salinas, Santa Rose-Petaluma, and San Luis Obispo-Paso Robles.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.

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