Housing Affordability Takes Another Dip

August 15, 2014

Housing affordability is slowly falling due to higher home prices and qualifying income levels, despite borrowing costs from mortgage rates remaining at their lowest readings of the year, according to the National Association of REALTORS® latest reading on its Housing Affordability Index.

The median price for a single-family home in June rose 4.5 percent year-over-year to $224,300. But price gains are continuing to slow, NAR researchers note.

Affordability inched down slightly in all regions month-over-month in June as well as year-over-year, according to NAR’s report. The Midwest saw the largest month-over-month drop in affordability, while the West posted the largest year-over-year drop, with affordability falling 10.5 percent in the past year.

Meanwhile, the National Association of Home Builders, which maintains a separate housing affordability index, released its latest reading this week showing that affordability dipped in the second quarter as several markets saw increases in home prices. The NAHB/Wells Fargo Housing Opportunity Index showed that 62.9 percent of new and existing homes sold between the beginning of April and the end of June were affordable to families earning the median income of $63,900 – down from 65.5 percent in the first quarter.

"The second quarter HOI reflects the slow but steady march toward the historic levels of price appreciation and interest rates that result in affordability levels we experienced before the mid-2000s boom," says NAHB Chief Economist David Crowe. "While we are seeing a slight decrease in affordability, it is still fairly high by historical standards."

Most Affordable Markets

The NAHB index shows that Youngstown-Warren-Boardman, Ohio-Pa., continues to be the most affordable major housing market in the nation, where 90.4 percent of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $52,700.

Other affordable markets also topping the index in the second quarter include:

  • Indianapolis-Carmel, Ind.
  • Syracuse, N.Y.
  • Harrisburg-Carlisle, Pa.
  • Scranton-Wilkes-Barre, Pa.

Least Affordable Markets

For the seventh consecutive quarter San Francisco-San Mateo-Redwood City, Calif., remains the nation’s priciest housing market, according to the NAHB index. About 11 percent of homes sold in the second quarter there were affordable to families earning the area’s median income of $100,400.

Other major metros that were found to be among the least affordable in the second quarter are:

  • Santa Ana-Anaheim-Irvine, Calif.
  • Los Angeles-Long Beach-Glendale, Calif.
  • San Jose-Sunnyvale-Santa Clara, Calif.
  • New York-White Plains-Wayne, N.Y.-N.J.

Source: “The Latest Housing Affordability Index,” National Association of REALTORS®’ Economists’ Outlook Blog (Aug. 15, 2014) and National Association of Home Builders