Housing Affordability Remains Flat in 2017

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February 06, 2018

Data for all four quarters of 2017 show housing affordability remaining essentially flat throughout the year, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released today.

In all, 59.6 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 $68,000. This is just slightly up from the 58.3 percent of homes sold that were affordable to median-income earners in the third quarter, and effectively the same rate as in the fourth quarter of 2016, when the HOI stood at 59.9 percent.

Builder confidence and consumer demand remain strong, and this should help bring more buyers into the marketplace in the year ahead,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “At the same time, builders are working hard to keep home prices affordable as they continue to grapple with persistent labor and lot shortages, burdensome regulations and rising costs for building materials. Another factor that could have a negative effect on housing affordability in the first quarter is a recent rise in mortgage interest rates.”

“Ongoing job and economic growth coupled with tight inventories and rising household formations are boosting housing demand,” said NAHB Chief Economist Robert Dietz. “Meanwhile, NAHB has reduced its home price forecast this year to 2.9 percent as a result of the recently enacted tax reform legislation. While it will further boost economic activity, the new tax law is expected to contribute to price softness in some high-cost, high-tax markets now that deductions for income and property taxes are capped at $10,000 per year.”

The national median home price fell to $255,000 in the fourth quarter of 2017 from $260,000 in the previous quarter. Price changes in this series can sometimes diverge from other national measures due to the limited geographic scope of the underlying data.  Meanwhile, average mortgage rates inched down four basis points in the fourth quarter to 4.06 percent from 4.1 percent in the third quarter.

Youngstown-Warren-Boardman, Ohio-Pa., and Syracuse, N.Y., tied as the nation’s most affordable major housing market. In both metros, 88.3 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the area’s median income of $54,600 and $68,000, respectively. Meanwhile, Cumberland, Md.-W.Va., was rated the nation’s most affordable smaller market, with 96.9 percent of homes sold in the fourth quarter being affordable to families earning the median income of $53,900.

Rounding out the top five affordable major housing markets in respective order were Indianapolis-Carmel-Anderson, Ind.; Scranton-Wilkes Barre-Hazleton, Pa.; and Columbia, S.C.

Smaller markets joining Cumberland at the top of the list included Kokomo, Ind.; Wheeling, W.Va.-Ohio;  Davenport-Moline-Rock Island, Iowa-Ill.; and Mansfield, Ohio, which also posted a fifth place tie with Monroe, Mich.

San Francisco, which had been the nation’s least affordable housing market for 19 straight quarters before being displaced by Los Angeles in the third quarter of 2017, once again assumed the mantle as the least affordable market. There, just 6.3 percent of the homes sold in the last quarter of 2017 were affordable to families earning the area’s median income of $113,100.

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.

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 12 percent of all new and existing homes sold were affordable to families earning the area’s median income of $63,100.

In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; San Luis Obispo-Paso Robles-Arroyo Grande; Napa; and San Rafael.

Please visit www.nahb.org/hoi for tables, historic data and details.

Editor's Note: The NAHB/Wells Fargo Housing Opportunity Index (HOI) is a measure of the percentage of homes sold in a given area that are affordable to families earning the area's median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by Core Logic, a data and analytics company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Agency.

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