The latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) tracks updates in housing affordability. The data found that nominal wage gains (unadjusted for inflation) combined with lower mortgage rates and home prices helped to boost housing affordability at the start of 2023. However, ongoing supply chain issues and wage growth cooling indicate concerns for the rest of 2023. Affordability also lags behind the beginning of 2022.
Key details:
- 45.6% of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $96,300.
- This is up from 38.1% from the previous quarter which was the lowest level since NAHB began tracking affordability on a consistent basis in 2012.
- However, this is 11.3% lower than the first quarter 2022 score of 56.9%.
- Median family income rose 7% from 2022 to 2023, from $90,000 in the former.
- The HOI shows that the national median home price fell to $365,000 in Q1 2023, down from $370,000 in Q4 2022. Meanwhile, average mortgage rates were 6.46% in the first quarter, down from a series high of 6.80% in the fourth quarter.
- Top five affordable major housing markets:
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- Lansing-East Lansing, Michigan
- Scranton-Wilkes-Barre, Pennsylvania
- Rochester, New York
- Toledo, Ohio
- Pittsburgh, Pennsylvania
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- Top five affordable small housing markets:
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- Cumberland, Maryland/West Virginia
- Elmira, New York
- Kokomo, Indiana
- Springfield, Ohio
- Wheeling, West Virginia/Ohio
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- Top five least affordable major housing markets—all located in California
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- Los Angeles-Long Beach-Glendale
- Anaheim-Santa Ana-Irvine
- San Diego-Chula Vista-Carlsbad
- San Francisco-San Mateo-Redwood City
- San Jose-Sunnyvale-Santa Clara
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- Top five least affordable small housing markets—all located in California
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- Napa
- Salinas
- San Luis Obispo-Paso Robles
- Santa Maria-Santa Barbara
- Merced
Takeaways:
“An uptick in housing affordability in the first quarter of 2023 corresponds to a rise in builder sentiment over the same period as well as an increase in single-family permits,” said NAHB Chairman Alicia Huey, a custom home builder from Birmingham, Alabama. “And while buyer conditions improved at the beginning of the year, builders continue to wrestle with a host of affordability challenges. These include a shortage of distribution transformers and concrete that are delaying housing projects and raising construction costs, a lack of skilled workers and tightening credit conditions.”
“Elevated interest rates and higher home prices coming out of the pandemic have left housing affordability conditions considerably lower on a year-over-year basis,” said NAHB Chief Economist Robert Dietz. “While affordability posted a gain in the first quarter, it is still well below the breakeven point of 50. The lack of housing units is the primary cause of the nation’s housing affordability challenges, and the best way to reduce housing costs and fight inflation is to put into place policies that will allow builders to construct more attainable housing.”
For more information, visit https://www.nahb.org/news-and-economics/housing-economics/indices/housing-opportunity-index.
