Housing Affordability Holds Steady but Supply-Side Challenges Persist

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Housing affordability held steady at its lowest level in nearly a decade, as higher home prices offset lower mortgage rates to keep the affordability rate flat in the third quarter of 2021.  In the months ahead, however, supply-chain disruptions and the prospect of higher interest rates will continue to threaten housing affordability.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), 56.6 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 $79,900. This is unchanged from the 56.6% of homes sold in the second quarter of 2021 and remains the lowest affordability level since the beginning of the revised series in the first quarter of 2012.

The HOI shows that the national median home price increased to a record $355,000 in the third quarter, up $5,000 from the second quarter and $35,000 from the first quarter. Meanwhile, average mortgage rates fell by 14 basis points in the third quarter to 2.95% from the rate of 3.09% in the second quarter. However, mortgage rates are currently running above 3.1%, and this higher trend could affect affordability later this year and into 2022.

Lansing, East Lansing, Mich. was the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. There, 89.1% of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $79,100.

Meanwhile, Davenport-Moline-Rock Island, Iowa-Ill. was rated the nation’s most affordable smaller market, with 93.4% of homes sold in the third quarter being affordable to families earning the median income of $76,300.

For the fourth straight quarter, Los Angeles-Long Beach-Glendale, Calif., remained the nation’s least affordable major housing market. There, just 8.3% of the homes sold during the third quarter were affordable to families earning the area’s median income of $80,000.

Four of the five least affordable small housing markets were also in the Golden State. However, at the very bottom of the affordability chart was Corvallis, Ore., where 6% of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $93,000.

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



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1 reply

  1. High prices must be covered not only by low rate mortgages – simply making money cheaper does not really work in the tough market situation. From my side, the government must rely on contractors, builders and other industry representatives. We cannot actually buy raw materials at low prices or pay our employees less for their physical work, but we can automate routine tasks using construction digitalization tools and save our money and time and thus try to make the construction process more affordable – contractors do not lose profit and customers do not pay extra.

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