Housing affordability held steady at its lowest level in nearly a decade in the third quarter, and ongoing supply chain disruptions and the potential for higher interest rates threaten to further exacerbate affordability in the coming months, according to a blog post on NAHB Now. The NAHB/Wells Fargo Housing Opportunity Index (HOI) indicates 56.6% of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income of $79,000. The HOI found Lansing-East Lansing, Michigan, and Pittsburgh were the nation’s most affordable major housing markets while each of the top five least affordable major metro markets are located in California.
“Persistent building material supply chain bottlenecks and tariffs on Canadian lumber and Chinese steel and aluminum continue to place upward pressure on construction costs and home prices,” said NAHB Chairman Chuck Fowke. “Policymakers must fix supply chain vulnerabilities that are disrupting and delaying construction projects and hurting housing affordability.”
“Interest rates are anticipated to gradually rise in the coming months as the Fed begins to taper its monthly bond and mortgage-backed securities purchases,” said NAHB Chief Economist Robert Dietz. “To keep affordability problems from worsening in the future, policymakers need to tackle supply-chain challenges that are hindering new home production. Helping builders boost output will also slow the rapid rise in home prices that has occurred over the past year.”
The HOI shows that the national median home price increased to a record $355,000 in the third quarter, up $5,000 from the second quarter and $35,000 from the first quarter. Meanwhile, average mortgage rates fell by 14 basis points in the third quarter to 2.95% from the rate of 3.09% in the second quarter. However, mortgage rates are currently running above 3.1%, and this higher trend could affect affordability later this year and into 2022.
