Get Our Email Newsletter

Housing affordability hits 18-month low

WASHINGTON — Despite low interest rates, a supply shortage coupled with rising home prices contributed to a decline in housing affordability in the second quarter of 2020, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). 

In all, 59.6% of new and existing homes sold between the beginning of April and end of June were affordable to families earning an adjusted U.S. median income of $72,900. This is down from the 61.3% of homes sold in the first quarter of 2020 that were affordable to median-income earners and the lowest reading since the fourth quarter of 2018.

The Department of Housing and Urban Development’s original estimates of median family income for 2020 were developed prior to the COVID-19 pandemic. To account for the pandemic’s effects, the HUD estimates were reduced consistent with NAHB’s economic forecast for 2020. As a result, the 2020 national median income estimates used in the HOI calculations ($72,900) are 7.1% lower than the initial national 2020 estimates ($78,500) from HUD.

LBM Resources

Building Supply Industry Insights 2023

Discover how building supply leaders elevate their businesses by working with their ERP partners.

In November 2019, housing affordability was at the highest level in three years.

“There was underbuilding before the pandemic hit, and the coronavirus outbreak has exacerbated the situation by disrupting existing supply chains,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “Builders are particularly concerned over surging lumber prices that are up nearly 70% since mid-April.” 

“Home prices appreciated robustly during the second quarter due to better-than-expected housing demand in the wake of the pandemic and because the coronavirus hindered the ability of builders to ramp up production,” said NAHB Chief Economist Robert Dietz. “Looking forward, in this record-low interest rate environment housing should be a bright spot for the economy as rising demand continues in the suburbs, exurbs and other lower density markets.”

- Advertisement -

The HOI shows that the national median home price jumped to a record $300,000 in the second quarter from $280,000 in the previous quarter. Meanwhile, average mortgage rates fell by 27 basis points in the second quarter to 3.34% from 3.61% in the first quarter.

Scranton-Wilkes Barre-Hazleton, Pa., was rated the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. There, 89.1% of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $66,600. Meanwhile, Cumberland-Md.-W.Va., was rated the nation’s most affordable smaller market, with 96.9% of homes sold in the second quarter being affordable to families earning the median income of $57,500.

- Advertisement -

Rounding out the top five affordable major housing markets in respective order were Harrisburg-Carlisle, Pa.; Pittsburgh, Pa.; St. Louis-Mo.-Ill.; and Wilmington, Del.-Md.-N.J.

Smaller markets joining Cumberland at the top of the list included Binghamton, N.Y.; Kokomo, Ind.; Lima, Ohio; and Davenport-Moline-Rock Island, Iowa-Ill.

San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 8.5% of the homes sold during the second quarter were affordable to families earning the area’s median income of $129,200.

Other major metros at the bottom of the affordability chart were in California. In descending order, they included Los Angeles-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad.

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 16.1% of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $75,800.

In descending order, other small markets at the lowest end of the affordability scale included Merced; San Rafael; Santa Cruz-Watsonville; and San Luis Obispo-Paso Robles-Arroyo Grande.

Please visit www.nahb.org/hoi for tables, historic data and details.

Get our free newsletter

Join thousands of other lumber and building material industry leaders and keep up with the companies, people, products and issues shaping the industry.

What's New

Digital Partners

Become a digital partner ...

Sales Comp Study

Download this 55-page, in-depth study by LBM Journal of industry trends in sales force compensation and benefits. See how your organization stacks up.

Webinars

- Advertisement -

White Papers

View all ...

- Advertisement -

Partner Content

View all ...

- Advertisement -

It looks like you're using an ad blocker?

LBM Journal is only made possible with the support of our advertisers, but it appears that you have ad blocking enabled. Please disable ad blocking for this site. Thank you!

LBM Journal

Get the 2023 LBM Journal Sales Compensation & Benefits Study