Housing Affordability Declined in Q3, Says NAHB
Washington, DC, November 6, 2020-Record-low mortgage rates were not enough to offset inventory shortages and rising home prices as housing affordability continued to decline in the third quarter of 2020, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI).
In all, 58.3% of new and existing homes sold between the beginning of July and end of September were affordable to families earning an adjusted U.S. median income of $72,900. This is down from the 59.6% of homes sold in the second quarter of 2020 that were affordable to median-income earners and the lowest reading since the fourth quarter of 2018.
“Though low mortgage rates and favorable demographics have helped spur demand, a lack of inventory exacerbated by supply chain issues stemming from the COVID-19 pandemic have contributed to rising home prices,” said NAHB chairman Chuck Fowke. “Surging lumber prices also peaked more than 170% above mid-April levels in September, raising building costs. However, lumber prices are now trending lower, which is good news for prospective home buyers.”
“A six-month supply of homes is considered a normal supply and demand balance and this figure has been running below a four-month rate since July, putting upward pressure on home prices,” said NAHB chief economist Robert Dietz. “As builders look to ramp up production, the work-at-home trend is contributing to a suburban shift, meaning that buyers have additional market power to shop for affordable markets.”
The HOI shows that the national median home price jumped to an all-time high of $313,000 in the third quarter, surpassing the previous record-high of $300,000 set in the second quarter. Meanwhile, average mortgage rates fell by 29 basis points in the third quarter to a record-low of 3.05% from 3.34% in the second quarter.