Mirroring a steep rise in mortgage rates that began in the early part of 2022 and coupled with ongoing building material supply chain bottlenecks that increased construction costs, housing affordability posted three consecutive quarterly declines in 2022 and now stands at its lowest level since the National Association of Home Builders (NAHB) began tracking it on a consistent basis in 2012.
According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), just 38.1% 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 $90,000. The index trails the previous mark of 42.2% in the third quarter and 42.8% set in the second quarter.
However, a recent drop in mortgage rates over the past two months signals that declining affordability conditions may have reached their low point for this cycle.
While the HOI shows that the national median home price fell to $370,000 in the fourth quarter, it is still the third-highest median price in the history of the series, after the $380,000 price recorded in the third quarter and the all-time high of $390,000 in the second quarter. Meanwhile, average mortgage rates reached a series high of 6.80% in the fourth quarter, surpassing the previous record-high of 5.72% in the third quarter.
The top five most affordable major housing markets in the fourth quarter of 2022 were:
- Indianapolis-Carmel-Anderson, Ind.
- Rochester, N.Y.
- Pittsburgh, Pa.
- Toledo, Ohio
- Dayton-Kettering, Ohio
Top five least affordable major housing markets—all located in California:
- Los Angeles-Long Beach-Glendale
- Anaheim-Santa Ana-Irvine
- San Diego-Chula Vista-Carlsbad
- San Francisco-San Mateo-Redwood City
- San Jose-Sunnyvale-Santa Clara
Meanwhile, Bay City, Mich. was rated the nation’s most affordable small market, with 88.5% of homes sold in the fourth quarter being affordable to families earning the median income of $74,800.
The top five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, Calif., where 5.0% of all new and existing homes sold in the fourth quarter were affordable to families earning the area’s median income of $90,100.
Visit nahb.org/hoi for tables, historic data and details.