Housing Affordability Falls to More than 10-Year Low as Rising Interest Rates Take a Toll
Housing affordability fell to its lowest level since the National Association of Home Builders (NAHB) began tracking it on a consistent basis in 2012 as rising mortgage rates, ongoing building material supply chain disruptions, high inflation and elevated home prices pushed the housing market into a recession. And with mortgage rates moving even higher in the fall, affordability conditions are expected to further deteriorate through the end of the year.
According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), just 42.2% 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 $90,000. This marks the second consecutive quarterly record low for housing affordability since the Great Recession, trailing the previous mark of 42.8% set in the second quarter.
Policymakers must prioritize fixing building material supply chains and easing excessive regulations to help bring down construction costs and enable home builders to increase housing production.”
While the HOI shows that the national median home price fell to $380,000 in the third quarter, it is still the second-highest median price in the history of the series, after the $390,000 recorded in the previous quarter. Meanwhile, average mortgage rates reached a series high of 5.72% in the third quarter, up from 5.33% a quarter earlier. Looking ahead, affordability will continue to weaken, as Freddie Mac reports that at the end of October, the 30-year fixed-rate mortgage surpassed 7% for the first time since April 2002.
The Most and Least Affordable Markets in the Third Quarter
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, 84.4% of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $89,500.
Top five affordable major housing markets:
1.Lansing-East Lansing, Mich.
2.Indianapolis-Carmel-Anderson, Ind.
3.Scranton-Wilkes-Barre, Pa.
4.Toledo, Ohio
5.Syracuse, N.Y.
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