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Mortgage Rates Nudge Down Housing Affordability
Despite no change in the median price of all homes sold, housing became a bit less affordable during this year’s second quarter because of a slight uptick in the average mortgage interest rate, according to the latest NAHB/Wells Fargo Housing Opportunity Index (HOI), which was released on Aug. 23.
Meanwhile, the index showed that Indianapolis has been the most affordable major U.S. housing market for four quarters running.
“The second-quarter HOI reading indicates that 40.6% of new and existing homes that were sold during the second quarter were affordable to families earning the national median income of $59,600,” said NAHB President David Pressly. “This is just below 41.3% in the first quarter and the decline in affordability was caused by the somewhat higher mortgage rates that prevailed in the April to June period.”
The national weighted interest rate on fixed-rate and adjustable-rate mortgages — a key component in calculating the HOI — was 6.65% in the second quarter, up from 6.39% in the first three months of the year.
In Indianapolis, 87.4% of homes sold in the second quarter were affordable to families earning the area’s median household income of $65,100. The median sales price of all homes sold in Indianapolis during that time was $120,000, which was up from $113,000 in the previous quarter, but was the same as the sales price for the final quarter of 2005.
Following Indianapolis, the most affordable major metros were: Detroit-Livonia-Dearborn, Mich.; Grand Rapids-Wyoming, Mich.; Buffalo-Niagara Falls, N.Y.; and Youngstown-Warren-Boardman, Ohio-Pa., in that order.
The five most affordable smaller metro markets during the second quarter were: Springfield, Ohio and four Michigan locations: Bay City, Lansing-East Lansing, Saginaw-Saginaw Township North and Battle Creek.
In Los Angeles-Long Beach-Glendale, Calif. — the nation’s least-affordable major housing market for the seventh consecutive quarter — just under 2% of the homes sold during the second quarter were affordable to those earning the area’s median family income of $56,200. The median sales price of the homes sold was $521,000.
The next least affordable major metros were: Santa Ana-Anaheim-Irvine, Calif.; San Diego-Carlsbad-San Marcos, Calif.; New York-White Plains-Wayne, N.Y.-N.J.; and Stockton, Calif., in that order.
The five least affordable metro areas with populations below 500,000 were all located in California: Salinas, Merced, Modesto, Santa Cruz-Watsonville and Santa Barbara-Santa Maria.
For more details on the index, click here.
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