There is a downside to rapidly rising home prices: declining home affordability.

The share of new and existing homes affordable to median-income families plunged in the third quarter, to 64.5 percent, according to an index report from the National Association of Home Builders released today. That’s down from 69.3 percent in the second quarter — the biggest drop since second-quarter 2004.

“Housing affordability is being negatively affected by a ‘perfect storm’ scenario,” said NAHB Chairman Rick Judson in a statement.

“With markets across the country recovering, home values are strengthening at the same time that the cost of building homes is rising due to tightened supplies of building materials, developable lots and labor.”

NAHB Chief Economist David Crowe said higher mortgage rates also contributed to the decrease in affordability.

The most affordable major housing markets in the U.S. last quarter were Indianapolis-Carmel, Ind., and Syracuse, N.Y., with 93.3 percent of homes sold in the third quarter affordable to families earning the areas’ median income.

For the fourth straight quarter, the least affordable market in the U.S. was the tech-heavy San Francisco-San Mateo-Redwood City, Calif., metro area where just 16 percent of sold homes were affordable to median-income families in the third quarter.

Source: NAHB

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Will you attend ICLV virtually or in-person? The agenda is packed with stellar speakers and sessions.Learn More×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription