Only 37.4% of new and existing homes sold during the third quarter were affordable to families earning the median income of $96,300, according to the National Association of Home Builders (NAHB)/Wells Fargo (NYSE:WFC) Housing Opportunity Index (HOI). This is down from 40.5% in the second quarter of this year and is the lowest reading since NAHB began tracking affordability data since 2012.
“Rising mortgage rates have clearly been the key cause of declining housing affordability conditions and shelter costs have been the main driver of inflation,” said NAHB Chief Economist Robert Dietz. “And with shelter cost increases driven by a lack of affordable supply and increasing development costs, the best way to tackle America’s growing housing affordability challenges is to enact policies that will allow builders to increase the housing supply.”
The HOI shows that the national median home price held steady at $388,000 in the third quarter, unchanged from the previous quarter, but average mortgage rates jumped from 6.59% in the second quarter up to 7.13% in the third quarter—the highest rate in the HOI series history.
The NAHB determined that Michigan’s Lansing-East Lansing metro was the nation’s most affordable major housing market in the third quarter, where 79.8% of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $97,800.
And for the 12th straight quarter, California’s Los Angeles-Long Beach-Glendale metro was the nation’s least affordable major housing market, with only 2.7% of the homes sold during the third quarter were affordable to families earning the area’s median income of $98,200. California was home to five of the least affordable major housing markets and to five of the least affordable small housing markets.