Housing affordability remained at a 10-year low in the third quarter of 2018, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
“Continuing home price appreciation and rising interest rates coupled with persistent labor shortages are contributing to housing affordability concerns,” NAHB Chairman Randy Noel said. “Builders are increasingly focusing on managing home construction costs so that they do not outpace wage gains.”
In Q3, only 56.4% of new and existing homes sold between the months of July and September were affordable to families earning the U.S. median income of $71,900.
This is the lowest reading since mid-2008 and is down from the 57.1% of homes sold in Q2 that were affordable to median-income earners, according to the report.
“Ongoing job and economic growth provide a solid backdrop for housing demand amid recent declines in affordability,” NAHB Chief Economist Robert Dietz said. “However, housing affordability will need to stabilize to keep forward momentum from diminishing as we move into the new year.”
The national median home price increased from $265,000 to $268,000, which is the highest quarterly median price in the history of the HOI series. Average mortgage rates also rose 5 basis points from 4.67% in Q2 to 4.72% in Q3.
For the second consecutive quarter, New York hosted the nation’s most affordable major market.
In Syracuse, New York, 88.2% of all new and existing homes sold in Q3 were affordable to families earning the area’s median income of $74,100.
However, Indiana was home to the most affordable smaller market, where 93.2% of homes sold in Kokomo were affordable to families earning the median income of $64,100.
Once again, California was home to the nation’s least unaffordable metro markets, including Los Angeles, Long Beach-Glendale, Anaheim-Santa Ana-Irvine, San Jose-Sunnyvale-Santa Clara and San Diego-Carlsbad.
Notably, San Francisco was the nation’s least affordable major market for the fourth consecutive quarter. In this city, only 6.4% of homes sold in Q3 of 2018 were affordable to families earning the area’s median income of $116,400.
NOTE: The Housing Opportunity Index is a measure of the percentage of homes sold in a given area that are affordable to families earning the area’s median income during a specific quarter. Prices of new and existing homes sold are collected from Core Logic.