The big mortgage rate increases we have seen since the first of the year are being offset by the fact that Americans are making more money and home values appear to be moderating which is causing a boost to housing affordability in the first quarter of 2017, according to the latest report from the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
The number of affordable homes sold to median-income earners in the first quarter had risen to 60.3% from 59.9%.
The national median home price dropped $5,000 to $245,000 in the first quarter from $250,000 in the last quarter of 2016. Mortgage rates saw a large increase from 3.84% in the fourth quarter of 2016 to 4.33% in the first quarter 2017.
Youngstown-Warren-Boardman, Ohio-Pa. topped the charts for the second quarter in a row as the country’s most affordable major housing market with 92.7% of all new and existing homes sold in the first quarter were affordable to families earning the area’s median income of $54,600. Kokomo, Ind., was rated the nation’s most affordable smaller market, with 96.3% of homes sold in the first quarter being affordable to families earning the median income of $62,500, according to the report.
The other top five affordable major housing markets were Elgin, Ill.; Scranton-Wilkes Barre-Hazleton, Pa.; Buffalo-Cheektowaga-Niagara Falls, N.Y.; and Syracuse, N.Y.
Smaller markets at the top of the list included Glen Falls, N.Y.; East Stroudsburg, Pa.; Binghamton, N.Y.; and Lansing-East Lansing, Mich.
San Francisco-Redwood City-South San Francisco, Calif., topped the list as the country’s least affordable major housing market for the 18th consecutive quarter. There, just 11.8% of homes were affordable to families earning the area’s median income of $108,400.
Other major metros at the bottom of the affordability chart were located in California. In descending order, they included Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Diego-Carlsbad; and San Jose-Sunnyvale-Santa Clara (tied with San Diego).
All five least affordable small housing markets were also in California. At the very bottom of the affordability chart was Salinas, where 13.8 percent of all new and existing homes sold were affordable to families earning the area’s median income of $63,100.
In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; Napa; San Luis Obispo-Paso Robles-Arroyo Grande; and San Rafael.
“Builders are reporting confidence and solid traffic in many markets across the nation even as they continue to grapple with nagging headwinds,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “Regulatory constraints, trade barriers on Canadian softwood lumber, and persistent shortages of lots and labor are slowing the pace of the housing recovery.”
“Ongoing job growth continues to fuel demand for housing, while wage growth is helping to offset the effects of rising mortgage rates and keep home prices affordable,” said NAHB Chief Economist Robert Dietz. “NAHB anticipates that housing will continue on a gradual, upward path throughout the year.”