Housing Affordability Remains Near Historic Low Level

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Mortgage rates that hit more than a 20-year high, coupled with elevated construction costs and excessive regulatory costs, left housing affordability in the fourth quarter of 2023 virtually unchanged from the previous quarter and holding near its lowest level in more than a decade.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), just 37.7% 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 $96,300. This is nearly identical to the 37.4% posted in the third quarter of last year, which was the lowest reading since NAHB began tracking affordability on a consistent basis in 2012.

The fourth quarter also marks the final report of the long-running HOI series. Replacing the HOI in the first quarter of this year will be a new housing affordability index from NAHB called the Cost of Housing Index (CHI), a quarterly analysis of housing costs in the U.S. and metropolitan areas. The CHI represents the share of a typical family’s income needed to make a mortgage payment. A low-income CHI will also be produced for families earning only 33% of the area’s median income.

 

The HOI shows that the national median home price was $375,000 in the fourth quarter, down from $388,000 in the third quarter. Meanwhile, average mortgage rates increased more than 30 basis points from 7.13% in the third quarter up to 7.44% in the fourth quarter—the highest rate in the HOI series history.

The top five most affordable major housing markets in the fourth quarter of 2023 were:

  1. Lansing-East Lansing, Mich.
  2. Harrisburg-Carlisle, Pa.
  3. Indianapolis-Carmel-Anderson, Ind.
  4. Dayton-Kettering, Ohio
  5. Akron, Ohio

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, Bay City, Mich., was rated the nation’s most affordable small market, with 88.3% of homes sold in the fourth quarter being affordable to families earning the median income of $82,300.

The top five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Santa Maria-Santa Barbara, Calif., where 5.2% of all new and existing homes sold in the fourth quarter were affordable to families earning the area median income of $107,300.

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



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  1. The persistent challenge of housing affordability underscores the importance of flexible financing options like construction loans. By facilitating the development of affordable housing projects, construction loans can help alleviate the strain on prospective homeowners and renters, contributing to addressing the issue of housing affordability and fostering sustainable growth in the housing market.

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