A modest increase in interest rates and home prices kept housing affordability at a 10-year low in the third quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
In all, 56.4 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $71,900. This is down from the 57.1 percent of homes sold in the second quarter that were affordable to median-income earners and the lowest reading since mid-2008.
The national median home price edged up from $265,000 in the second quarter of 2018 to $268,000 in the third quarter. This is the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates rose by a nominal 5 basis points in the third quarter to 4.72 percent from 4.67 percent in the second quarter.
For the second straight quarter, Syracuse, N.Y., remained as the nation’s most affordable major housing market. There, 88.2 percent of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $74,100. Meanwhile, Kokomo, Ind. was rated the nation’s most affordable smaller market, with 93.2 percent of homes sold in the third quarter being affordable to families earning the median income of $64,100.
San Francisco, for the fourth straight quarter, was the nation’s least affordable major market. There, just 6.4 percent of the homes sold in the third quarter of 2018 were affordable to families earning the area’s median income of $116,400.
All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Santa Cruz-Watsonville, where 6.5 percent of all new and existing homes sold were affordable to families earning the area’s median income of $81,400.
Overall, housing demand continues to be supported by strong job and economic growth, but affordability is being challenged by price and interest rate increases as well as labor shortages and trade war concerns.
Visit nahb.org/hoi for tables, historic data and details.