Indianapolis, Ind., has claimed the title of the nation’s most affordable housing market among major metros with populations over 500,000, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) for the third quarter of 2005.
Other top-rated major cities for housing affordability include the metro area consisting of Youngstown-Warren and Boardman, Ohio-Pa. as well as Detroit-Litonia-Dearborn, Mich.; Buffalo-Niagara Falls, N.Y. and Oklahoma City, Okla., in that order.
Challenged by steadily rising home prices, overall housing affordability across the United States fell for the third consecutive quarter to its lowest level since the HOI was first reported in 1992, dipping 2.7 points to 43.2 on the HOI. This means that just over 43 percent of all new and existing homes sold in the country during the third quarter were affordable to median-income families. The decline was mostly attributable to a 5 percent gain in the average price of homes sold in the third quarter versus the second quarter.
“Strong house-price performance is the double-edged sword that has simultaneously attracted and discouraged new home buyers,” said Dave Wilson, NAHB president and a custom home builder from Ketchum, Idaho.
Though mortgage interest rates have risen significantly since the HOI was taken, they were likely not a significant factor in the affordability decline for the third quarter. The average weighted interest rate for fixed- and adjustable-rate mortgages, tabulated as an HOI component, held at 5.84 percent in the July-through-September period. This was barely above the 5.82 percent weighted interest rate used in second-quarter HOI calculations.
In the most affordable major metro area of Indianapolis, 89.7 percent of new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $64,000. The median price of homes that sold in Indianapolis during that time was $125,000.
Meanwhile, in the nation’s least affordable major housing market of Los Angeles-Long Beach-Glendale, Calif., a mere 2.4 percent of all homes sold were affordable to those earning the median income of $54,500 when the median sales price was $495,000.
California once again dominated the HOI rankings for the least affordable major metropolitan areas. Right behind Los Angeles on this list was Santa Ana-Anaheim-Irvine, Calif., followed by San Diego-Carlsbad-San Marcos, Calif. and Stockton. The metro of New York-White Plains-Wayne, N.Y.-N.J. was the only non-California entry on the list of the five least affordable major housing markets.
The HOI also ranked housing affordability in metro areas with populations fewer than 500,000. At the top of that list was Mansfield, Ohio; Cumberland, Md.; Lima, Ohio; Davenport-Moline-Rock Island, Iowa-Ill.; and Lansing-East Lansing, Mich., respectively. At the bottom of that list were the California cities of Merced, Salinas, Santa Barbara-Santa Maria, Modesto and Santa Cruz-Watsonville, respectively.
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