Housing Affordability Remains Favorable Even as it Hits an Eight-Year Low

Shortages of buildable lots and skilled labor, along with excessive regulations, rising mortgage interest rates and ongoing home price appreciation pushed housing affordability in the fourth quarter of 2016 to its lowest point since the third quarter of 2008, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).

 In all, 59.9 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 $65,700. This is down from the 61.4 percent of homes sold that were affordable to median-income earners in the third quarter.

The national median home price increased from $247,000 in the third quarter to $250,000 in the fourth quarter. Meanwhile, average mortgage rates edged higher from 3.76 percent to 3.84 percent in the same period.

Youngstown-Warren-Boardman, Ohio-Pa. was rated the nation’s most affordable major housing market, where 90.4 percent of all new and existing homes sold in this year’s fourth quarter were affordable to families earning the area’s median income of $53,900. Meanwhile, Fairbanks, Alaska, was once again rated the nation’s most affordable smaller market, with 95.1 percent of homes sold in the fourth quarter being affordable to families earning the median income of $93,800.

For the 17th consecutive quarter, San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 7.8 percent of homes sold in the fourth quarter were affordable to families earning the area’s median income of $104,700.

Four of the five least affordable small housing markets were also in California. At the very bottom of the affordability chart was Salinas, where 15.2 percent of all new and existing homes sold were affordable to families earning the area’s median income of $63,500.

Visit nahb.org/hoi  for tables, historic data and details.



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1 reply

  1. The threat of rising interest rates apparently caused an uptick in the late winter/early spring market, causing many to start looking earlier than planned. Many who planned to buy this spring were forced to act early. When this happens, a market turndown should be anticipated. Now would be a good time for builders to shop for a forward mortgage commitment to serve too very important purposes (1)keeping sales moving and, (2) protecting the sales backlog. Rather than a commitment for a finite rate, a rate cap commitment should prove much more affordable and serve the intended purpose. Under a rate cap commitment, the buyer will pay the prevailing rate if under the agreed upon cap rate and the cap rate if rates have risen above the cap rate. For example, if the cap rate is set at 5.5% and the market rate within 30 days of closing is 5%, the buyer would close at 5%. On the other hand, if the market rate was 6.5%, the buyer would close at the cap rate, 5.5%. Talk to your mortgage provider and if your lender doesn’t know what you are talking about, get a new lender. You will soon need them very badly.

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