Housing affordability falls to lowest level since Great Recession

affordability of housingWashington, DC – Rising mortgage rates, high inflation, low existing inventories and high house prices contributed to housing affordability falling to its lowest point since the Great Recession in the second quarter of 2022.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), only 42.8% of new and existing homes sold between early April and late June were affordable to families with a median income of $90,000 in the U.S. . This is a sharp drop from the 56.9% of homes sold in the first quarter that were affordable to middle-income earners.

“Rising housing costs due to higher interest rates, supply chain disruptions that have led to higher building material prices, and an ongoing shortage of construction workers are dramatically impacting home prices,” said NAHB chairman Jerry Konter, a Savannah homebuilder and developer. , Georgia. “In order to control housing costs, eventually more houses will have to be built, and it will be easier to increase production in more affordable smaller and medium-sized markets that are growing in population and attracting new businesses.”

NAHB chief economist, Robert Dietz, added: “Dwindling affordability has also weighed down builder sentiment for seven straight months, and NAHB forecasts a net decline for single-family homes in 2022 as housing markets slow due to ongoing affordability problems stemming largely from the recession. “Policy makers need to focus on repairing broken building materials supply chains and reducing ineffective zoning and other regulatory policies to help bend the cost curve and enable builders to drive viable housing production.”

The HOI shows that the national median home price rose to a record high of $390,000 in the second quarter, surpassing the previous record of $365,000 in the first quarter. Meanwhile, average mortgage rates rose 1.47 basis points to 5.33% in the second quarter, from an average rate of 3.86% in the first quarter. This is the largest quarterly rise in mortgage rates in the history of the HOI series, dating back to 2012.

The most and least affordable markets in Q1

Lansing-East Lansing, Michigan, was the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000, according to the NAHB. There, 85.2% of all new and existing homes sold in the second quarter were affordable to families earning the region’s median income of $89,500.

Top Five Affordable Major Housing Markets:

  1. Lansing-East Lansing, Mich.
  2. Indianapolis-Carmel-Anderson, Ind.
  3. Toledo, Ohio
  4. Harrisburg-Carlisle, Pa.
  5. Scranton-Wilkes-Barre, Pa.

Meanwhile, Elmira, NY, was rated as the nation’s most affordable small market, with 91.8% of homes sold in the second quarter being affordable to families with the median income of $77,900.

Top Five Affordable Small Housing Markets:

  1. Elmira, New York
  2. Cumberland, Md.-W.Va.
  3. Wheeling, W.Va.-Ohio
  4. Utica-Rome, New York
  5. Davenport-Moline-Rock Island, Iowa-Ill.

For the seventh straight quarter, Los Angeles-Long Beach-Glendale, California, remained the country’s least affordable major housing market. There, only 3.6% of homes sold in the second quarter were affordable to families earning the average income of $90,100 in the area.

Top Five Least Affordable Major Housing Markets – All in California:

  1. Los Angeles-Long Beach-Glendale
  2. Anaheim-Santa Ana-Irvine
  3. San Diego-Chula Vista-Carlsbad
  4. San Francisco-San Mateo-Redwood City
  5. San Jose-Sunnyvale-Santa Clara

The top five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, California, where 5.3% of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $90,100.

Top Five Least Affordable Small Housing Markets – All in California:

  1. salinas
  2. Napa
  3. San Luis Obispo – Paso Robles
  4. Santa Cruz Watsonville
  5. Santa Maria Santa Barbara

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