US housing affordability eases somewhat in Q1
But affordability index is still well below the breakeven point of 50.
Housing affordability showed signs of easing in the first quarter, according to the National Association of Home Builders (NAHB).
The NAHB)/Wells Fargo Housing Opportunity Index (HOI) improved by 38.1% from the Q4 2022 reading, the lowest level since 2012, thanks to lower home prices and solid wage gains. HOI data showed that the national median home price declined to $365,000 in the first quarter from $370,000 in the previous quarter. Additionally, long-term mortgage rates averaged 6.46% in Q1, down from a series-high of 6.80% in Q4. The US median family income jumped 7% from $90,000 in 2022 to $96,300 in 2023.
The quarterly HOI increase brings the share of new and existing homes affordable to families earning the US median income of $96,300 to 45.6% of all homes sold in Q1. However, the index remained significantly lower compared to the first quarter 2022 reading of 56.9%, a reminder of ongoing building material supply chain issues and other affordability challenges.
“Elevated interest rates and higher home prices coming out of the pandemic have left housing affordability conditions considerably lower on a year-over-year basis,” said NAHB chief economist Robert Dietz. “While affordability posted a gain in the first quarter, it is still well below the breakeven point of 50. The lack of housing units is the primary cause of the nation’s housing affordability challenges, and the best way to reduce housing costs and fight inflation is to put into place policies that will allow builders to construct more attainable housing.”
“An uptick in housing affordability in the first quarter of 2023 corresponds to a rise in builder sentiment over the same period as well as an increase in single-family permits,” said NAHB chairman Alicia Huey. “And while buyer conditions improved at the beginning of the year, builders continue to wrestle with a host of affordability challenges. 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.”
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