Elevated Home Prices Show Signs of Continued Market Recovery in Q2

A slight drop in nationwide housing affordability was recorded in the second quarter of 2015, mostly due to rising home prices in many housing markets, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released today.

“Home price appreciation in many markets across the nation are a sign that the housing recovery continues to move forward,” said Tom Woods, NAHB Chairman and a home builder from Blue Springs, Missouri. “At the same time, the cost of building a home is rising due to higher costs for buildable lots and skilled labor.”

According to the index, of the new and existing homes sold between the beginning of April and end of June, 63.2 percent were affordable to families earning the U.S. median income of $65,800. This is a 3.3 percent drop from the 66.5 percent of homes sold that were affordable to median-income earners in the first quarter.

NAHB also reported that the national median home price increased from $210,000 in the first quarter to $230,000 in the second quarter. Meanwhile, average mortgage rates edged slightly lower from 4.03 percent to 3.99 percent in the same period.

“Though affordability edged slightly lower in the second quarter, the HOI remains well above 50, where half the households can afford half the homes sold,” said David Crowe, NAHB chief economist. “Low mortgage rates, pent-up demand and continued job growth should contribute to a gradual, steady rise in housing throughout the year.”

The nation’s most affordable major housing market, Youngstown-Warren-Boardman, Ohio-Pennsylvania beat out Syracuse, New York which fell to the second slot following two straight quarters at the top of the list. In Youngstown-Warren-Boardman, 90.6 percent of all new and existing homes sold in this year’s second quarter were affordable to families earning the area’s median income of $53,700, NAHB reports.

Rounding out the top five affordable housing major housing markets in respective order were Indianapolis-Carmel, Indiana; Scranton-Wilkes-Barre, Pennsylvania; and Cincinnati-Middletown, Ohio-Kentucky-Indiana.

For the 11th consecutive quarter, San Francisco-San Mateo-Redwood City, California was the nation’s least affordable major housing market with just 11 percent of homes sold in the second quarter affordable to families earning the area’s median income of $103,400.

California hosted all five least affordable small housing markets, NAHB says. At the very bottom of the affordability chart was Santa Cruz-Watsonville, California, where 18.2 percent of all new and existing homes sold were affordable to families earning the area’s median income of $87,000. Other small markets at the lowest end of the affordability scale included Napa, Salinas, San Luis Obispo-Paso Robles, and Santa Barbara-Santa Maria-Goleta, respectively.

Click here to view the National Association of Home Builders/Wells Fargo Housing Opportunity Index.