English
Arabic
French
Spanish
Portuguese
Deutsch
Turkish
Dutch
Italiano
Russian
Romaian
Portuguese (Brazil)
Greek
Housing affordability has risen from a record low, but affordability conditions remain challenging. Just 45.6 percent of homes sold during the first quarter of 2023 were affordable to families earning a typical income, up from 38.1 percent in the fourth quarter of 2022, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index.
The affordability squeeze comes after the coronavirus pandemic created a residential real estate boom, one characterized by record-high home values. As recently as the first quarter of 2020, the start of the pandemic, fully two-thirds of homes were in reach of typical buyers. But rising demand and inventory shortages drove prices up, and when mortgage rates started climbing in mid-2022, potential buyers began feeling a severe pinch. And they still are, even though the rise in home prices has slowed somewhat.
3 factors drive affordability
The home builders’ index looks at three variables: incomes, home prices and mortgage rates. The affordability study shows nationwide home prices remain high, although they’ve fallen from the records set earlier in 2022. The median price of all homes sold in the first quarter was $365,000, down from $370,000 in the fourth quarter and $390,000 in the second quarter of 2022.
In a trend that eased the affordability squeeze, average mortgage rates fell to 6.46 percent in the first quarter of 2023. But they’re still more than double the average rate of 3.16 percent in the fourth quarter of 2021.
Meanwhile, wages are rising — median income rose to $96,300 in 2023 from $90,000 in 2022, according to the index, a 7 percent climb.
In an additional pressure on affordability, construction costs have continued to rise.
“While buyer conditions improved at the beginning of the year, builders continue to wrestle with a host of affordability challenges,” National Association of Home Builders Chairwoman Alicia Huey said in a statement. “These include a shortage of distribution transformers and concrete that are delaying housing projects and raising construction costs, a lack of skilled workers and tightening credit conditions.”
The 5 most affordable metros
Home prices and incomes vary widely around the country. Oases of affordability do still exist, mainly in the Rust Belt and Midwest. The top five most affordable places among metro areas with a population of 500,000 or more:
Lansing, Michigan: This metro area has a median family income of $97,800 and a median home price of $150,000. As a result, 87.5 percent of homes were affordable for typical earners in the first quarter of 2023, the builders’ index says.
Scranton, Pennsylvania: This metro area has a median family income of $86,500 and a median home price of $162,000. As a result, 84.5 percent of homes were affordable for typical earners.
Rochester, New York: As a result of modest home prices, 82.7 percent of all new and existing homes sold in the fall months were affordable to families earning the upstate New York area’s median income of $97,600. The median home price was $170,000.
Toledo, Ohio: With a median family income of $87,900 and a median home price of $150,000, fully 82.6 percent of homes were in reach of median-income families.
Pittsburgh: The median sale price was $179,000, and 82.3 percent of all new and existing homes sold the fourth quarter were affordable to families earning the area’s median income of $102,600.
The 5 least affordable metros
At the opposite end of the affordability spectrum, California dominates. The nation’s least-affordable markets are all in The Golden State:
Los Angeles-Long-Beach-Glendale: In a market with a median home price of $800,000, LA’s median income of just $97,500 doesn’t go far. As a result, only 4.1 percent of homes were affordable for typical families.
Anaheim-Santa Ana-Irvine: Orange County’s incomes are high: The typical family makes $127,400 this year. But home prices are higher, at a median of $960,000. That means just 5.7 percent of homes are in reach of average families.
San Diego-Carlsbad: San Diego has a median family income of $116,800 and a median home price of $775,000, translating to just 7.5 percent of homes falling in the typical buyer’s budget.
San Francisco-Redwood City-South San Francisco: Incomes are high here — the median is $177,200. Prices are even higher — the typical home went for $1.36 million. That translates to just 8.5 percent of homes sold during the winter months falling in the range of affordability for families earning the area’s median income.
San Jose, California: This area’s median family income is $181,300, highest in the nation, but the typical home sold for $1.28 million. That meant 12.5 percent of homes sold were affordable.
Housing affordability has been an ongoing challenge in California, even pre-dating the pandemic. Along with New York City and parts of the Pacific Northwest, it has seen strong demand and little new building since the Great Recession.
