Home Affordability Index Archives

Buying A Home Remains An Affordable Choice

Despite rising prices and higher mortgage rates, an analysis of homes sold during the final quarter of 2016 found that 59.9 percent of both new and existing homes were affordable to a family earning the median income of $65,700. The numbers – from the National Association of Home Builders Housing Opportunity Index – show that the majority of homes available for sale are still within reach for Americans hoping to buy this year. Robert Dietz, NAHB’s chief economist, says buying remains an affordable choice, despite the fact that affordability conditions fell slightly from the previous quarter. “Affordability remains positive nationwide even as demand is outstripping supply in many markets,” Dietz said. “Though mortgage rates are rising, incomes should rise faster as well, helping to keep home prices affordable.” The report found the national median home price increased to $250,000 in the fourth quarter, up from $247,000. Still, a stronger job market and rising wages should help offset the effects of higher prices and rising mortgage rates. In addition, builders remain confident that the market will continue to improve this year, which could lead to more new homes being built. As more homes become available for sale, price increases should begin to moderate, which would help improve affordability conditions even further. More here.

Number Of Affordable Markets Increases

Last year, an analysis of 417 counties across the country found 82 of them less affordable than historically normal. The same analysis done this year showed 74 counties exceeding normal levels of affordability. That improvement, however small, is an indication that home prices are increasing at a somewhat slower pace this year. The data – from RealtyTrac’s Q2 2016 Home Affordability Index – looked at the percentage of average wages needed to make monthly mortgage payments on a median priced home with a 30-year fixed-rate loan and a 3 percent down payment. Daren Blomquist, RealtyTrac’s senior vice president, says there is good news to be found in the report. “Although nearly one in five U.S. housing markets was not affordable by historic standards in the second quarter, the good news is that affordability is improving compared to a year ago in the majority of markets thanks to a combination of slowing home price appreciation and accelerating wage growth, along with falling interest rates,” Blomquist said. “The average interest rate on a 30-year fixed-rate mortgage is down 37 basis points from a year ago, while annual wage growth accelerated compared to a year ago in 72 percent of the markets we analyzed and home price growth slowed compared to a year ago in 68 percent of the markets, including bellwether markets such as Los Angeles County, Miami-Dade County, Brooklyn, Dallas County, and San Francisco County.” More here.

Buying Still Affordable In Majority Of Markets

RealtyTrac’s Q1 2016 Home Affordability Index looked at median home prices and average wage data in 456 counties across the country to determine how affordable buying a home was now compared to historic norms. According to the results, just 9 percent of counties were less affordable now than previously normal. But – though that means the vast majority of markets are more affordable than they normally are – the number of counties that are now less affordable climbed to 43 from 10 at the same time last year. Daren Blomquist, RealtyTrac’s senior vice president, says if home prices continue to rise faster than wages, that number will grow. “While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” Blomquist said. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.” By comparison, 99 percent of analyzed counties were less affordable than normal at the height of the housing bubble. When prices hit their low in 2012, only two of the 456 included counties exceeded historically normal affordability levels. More here.