Rising Mortgage Rates Push Housing Affordability to Lowest Level in Index History

Rising mortgage rates, elevated construction costs and limited existing inventory helped push housing affordability in the third quarter of 2023 to its lowest level in more than a decade.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), just 37.4% 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 $96,300. This is down from 40.5% posted in the second quarter of this year, and the lowest reading since NAHB began tracking affordability on a consistent basis in 2012.

The HOI shows that the national median home price held steady at $388,000 in the third quarter, unchanged from the previous quarter. Meanwhile, average mortgage rates jumped from 6.59% in the second quarter up to 7.13% in the third quarter – the highest rate in the HOI series history.

The top five most affordable major housing markets in the third quarter of 2023 were:
1. Lansing-East Lansing, Mich.
2. Youngstown-Warren-Boardman, Ohio-Pa.
3. Harrisburg-Carlisle, Pa.
4. Indianapolis-Carmel-Anderson, Ind.
5. Scranton-Wilkes-Barre, Pa.

Top five least affordable major housing markets—all located in California:
1. Los Angeles-Long Beach-Glendale
2. Anaheim-Santa Ana-Irvine
3. San Diego-Chula Vista-Carlsbad
4. Oxnard-Thousand Oaks-Ventura
5. San Francisco-San Mateo-Redwood City

Meanwhile, Cumberland, Md.-W.Va., was rated the nation’s most affordable small market, with 93.7% of homes sold in the third 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. At the very bottom of the affordability chart was Napa, Calif., where 4.2% of all new and existing homes sold in the third quarter were affordable to families earning the area median income of $129,600.

Visit nahb.org/hoi  for tables, historic data and details.
Note:  The Housing Opportunity Index will be discontinued after the fourth quarter of 2023. A new housing affordability index from NAHB will begin in the first quarter of 2024.

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