Housing Affordability Drops to 4-Year Low as Rates, Prices Rise
08/14/2013 By: Krista Franks Brock
While rising home prices across the nation may be good news as
they imply recovering markets, the trend may dampen housing
affordability. Having been historically high for the past few years,
affordability dipped somewhat in the second quarter of this year,
according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity index.
Increasing prices and mortgage rates “contributed to affordability slipping to the lowest level in four years,” said David Crowe, chief economist at NAHB.
Nationally, the median home price rose from $185,000 in Q2 2012 to $202,000 over the most recent quarter.
At the same time, affordability fell from 73.7 percent in this year’s first quarter to 69.3 percent—meaning 69.3 percent of Americans earning the national median income could afford a home sold during the quarter.
Increasing prices and mortgage rates “contributed to affordability slipping to the lowest level in four years,” said David Crowe, chief economist at NAHB.
Nationally, the median home price rose from $185,000 in Q2 2012 to $202,000 over the most recent quarter.
At the same time, affordability fell from 73.7 percent in this year’s first quarter to 69.3 percent—meaning 69.3 percent of Americans earning the national median income could afford a home sold during the quarter.
The second quarter marks the first time since 2008 the index has fallen below 70 percent, according to NAHB.
“Such movement would be less concerning if it were not for ongoing discussions regarding potential changes to the mortgage interest deduction and federal support for the secondary mortgage market, both of which play enormous roles in keeping homeownership affordable,” Crowe said.
“Such movement would be less concerning if it were not for ongoing discussions regarding potential changes to the mortgage interest deduction and federal support for the secondary mortgage market, both of which play enormous roles in keeping homeownership affordable,” Crowe said.
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