Rising Interest Rates, Home Prices Bring Housing Affordability to 10-Year Low
Housing affordability in the U.S. continues to turn heads as the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) revealed a decade-long low in the third quarter of 2018. Economists say rising interest rates and home prices as well as the ongoing labor shortages are to blame.
"Builders are increasingly focusing on managing home construction costs so that they do not outpace wage gains," NAHB Chairman Randy Noel said in a statement.
"Ongoing job and economic growth provide a solid backdrop for housing demand amid recent declines in affordability," added NAHB Chief Economist Robert Dietz in the same article. "However, housing affordability will need to stabilize to keep forward momentum from diminishing as we move into the new year."
According to the index, the percentage of affordable new and existing homes sold dropped between July and September from about 57% in the second quarter to 56.4% in the third quarter. Furthermore, those homes were only affordable to families with a median income of roughly $72,000. While the median home price rose by $3,000 to $268,000, average mortgages rates also increased to 4.72%.
NAHB reported locations in Indiana and Pennsylvania had the top-five affordable major housing markets, with smaller markets in rural New York, Alaska, Maryland, West Virginia and Ohio.
—Andrew Michaels, editorial associate