Housing affordability across the United States remained virtually unchanged in the first quarter compared to fourth-quarter 2005, according to the latest National Association of Home Builders’/Wells Fargo Housing Opportunity Index, as slightly lower home prices and higher household income helped offset rising mortgage rates.
The HOI rose marginally from its lowest level on record, 41 at year-end 2005, to 41.3 in the first quarter of 2006.
“The latest HOI shows that only 41.3 percent of new and existing homes that were sold during this year’s first quarter were affordable to families earning the national median income,” said NAHB President David Pressly, a home builder from Statesville, N.C. “This is down from just over 50 percent of all homes sold in the first quarter of 2005 that were affordable to the average family.”
“Compared to the fourth quarter of last year, the median price of all new and existing homes that were sold during the first quarter of 2006 declined 1.5 percent, while the national median income, as calculated by the federal government on an annual basis, was adjusted upward from $58,000 to $59,600,” said NAHB Chief Economist David Seiders. “These factors kept housing affordability from sliding further despite the fact that the national weighted interest rate on fixed- and adjustable-rate mortgages rose 18 basis points in the period, from 6.21 percent to 6.39 percent.”
Indianapolis, Ind., was the nation’s most affordable major housing market for a third consecutive quarter in the beginning of 2006, according to the HOI. In that market, just over 90 percent of homes sold in the first 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 $113,000 — down from $120,000 at year-end 2005. Also near the top of the list for affordable major metros was Youngstown-Warren-Boardman, Ohio-Pa., followed by Detroit-Livonia-Dearborn, Mich.; Rochester, N.Y.; and Buffalo-Niagara Falls, N.Y., in that order.
Four smaller housing markets outranked all others in housing affordability this time around, including Lansing-East Lansing, Mich., at the top of the list; Davenport-Moline-Rock Island, Iowa-Ill.; Lima, Ohio; and Battle Creek, Mich., respectively. Bay City, Mich., was the fifth-most affordable market smaller than 500,000 people.
Los Angeles-Long Beach-Glendale, Calif., maintained its standing at the very bottom of the affordability chart in the first quarter, with just 1.9 percent of new and existing homes sold in the area being affordable to families earning the median household income of $56,200. The median price of all homes sold in the metro during the first quarter was $500,000, which was unchanged from the previous HOI. Other major metros at the bottom of the housing affordability chart included Santa Ana-Anaheim-Irvine, Calif., followed by San Diego-Carlsbad-San Marcos, Calif.; New York-White Plains-Wayne, N.Y.-N.J.; and Nassau-Suffolk, N.Y.
Among metro areas smaller than 500,000 people, Santa Barbara-Santa Maria, Calif., was the least affordable housing market. Four other small California markets also fell at the bottom of the affordability chart, including Modesto as the second-least affordable small market, followed by Salinas, Merced, and Napa.
Visit www.nahb.org/hoi for tables, historic data and details.
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