Rising Home Prices Across the U.S. Impacting Consumer Affordability

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According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released this week, firming home prices in many housing markets resulted in a modest drop in nationwide housing affordability in the second quarter of 2015.

"Home price appreciation in many markets across the nation are a sign that the housing recovery continues to move forward," said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. "At the same time, the cost of building a home is rising due to higher costs for buildable lots and skilled labor."

"Though affordability edged slightly lower in the second quarter, the HOI remains well above 50, where half the households can afford half the homes sold," said NAHB Chief Economist David Crowe. "Low mortgage rates, pent-up demand and continued job growth should contribute to a gradual, steady rise in housing throughout the year."

In all, 63.2 percent of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $65,800. This is down from the 66.5 percent of homes sold that were affordable to median-income earners in the first quarter.

The national median home price increased from $210,000 in the first quarter to $230,000 in the second quarter. Meanwhile, average mortgage rates edged slightly lower from 4.03 percent to 3.99 percent in the same period.

Youngstown-Warren-Boardman, Ohio-Pa. was rated the nation's most affordable major housing market, beating out Syracuse, N.Y., which fell to the second slot following two straight quarters at the top of the list. In Youngstown-Warren-Boardman, 90.6 percent of all new and existing homes sold in this year's second quarter were affordable to families earning the area's median income of $53,700.

Rounding out the top five affordable housing major housing markets in respective order were Indianapolis-Carmel, Ind.; Scranton-Wilkes-Barre, Pa.; and Cincinnati-Middletown, Ohio-Ky.-Ind.

Meanwhile, Kokomo, Ind. claimed the title of most affordable small housing market in this year's second quarter. There, 95.5 percent of homes sold during the second quarter were affordable to families earning the area's median income of $55,200.

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

For the11th consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation's least affordable major housing market. There, just 11 percent of homes sold in the second quarter were affordable to families earning the area's median income of $103,400.

Other major metros at the bottom of the affordability chart included Los Angeles-Long Beach-Glendale, Calif.; Santa Ana-Anaheim-Irvine, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; and New York-White Plains-Wayne, N.Y.-N.J.

All five least affordable small housing markets were in California. At the very bottom of the affordability chart was Santa Cruz-Watsonville, Calif., where 18.2 percent of all new and existing homes sold were affordable to families earning the area's median income of $87,000. Other small markets at the lowest end of the affordability scale included Napa, Salinas, San Luis Obispo-Paso Robles and Santa Barbara-Santa Maria-Goleta, respectively.