Rising home prices and interest rates coupled with elevated construction costs, low existing inventory and solid demand resulted in a significant decline in housing affordability during the second quarter of 2023.
According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), 40.5% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $96,300. This is down from 45.6% posted in the first quarter of this year, and the second-lowest reading since NAHB began tracking affordability on a consistent basis in 2012.
The HOI shows that the national median home price increased to $388,000 in the second quarter, up from $365,000 in the previous quarter. Meanwhile, average mortgage rates rose from 6.46% to 6.59% during this period.
The top five most affordable major housing markets in the second quarter of 2023 were:
- Lansing-East Lansing, Mich.
- Scranton-Wilkes-Barre, Pa.
- Harrisburg-Carlisle, Pa.
- Indianapolis-Carmel-Anderson, Ind.
- Pittsburgh, Pa.
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
- Oxnard-Thousand Oaks-Ventura
- San Francisco-San Mateo-Redwood City
Meanwhile, Cumberland, Md.-W.Va., was rated the nation’s most affordable small market, with 95.5% of homes sold in the second quarter being affordable to families earning the median income of $89,900.
The top five least affordable small housing markets were also in the Golden State. Tied at the very bottom of the affordability chart were Salinas, Calif., and San Luis Obispo-Paso Robles, Calif., where 6.5% of all new and existing homes sold in the second quarter were affordable to families earning the area median income of $100,400 in Salinas and $113,100 in San Luis-Obispo-Paso Robles.
Visit nahb.org/hoi for tables, historic data and details.
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The combination of rising mortgage rates and home prices highlighted in the article could impact construction loan customers by potentially increasing the overall cost of new home projects. This could challenge affordability and decision-making for those seeking to build homes amidst these market shifts.