Rates at 20-year highs and other ongoing issues forced affordability to hover near a decade-low in Q4 2023, constraining the housing market.
A new report from the National Association of Home Builders revealed that housing affordability stayed close to its lowest level in about a decade in the last quarter of 2023. Just 37.7% of new and existing homes sold in that period were affordable to families earning the U.S. median income of $96,300.
This is basically identical to Q3 2023, which posted the lowest-ever reading of the NAHB/Wells Fargo Housing Opportunity Index. That index has been tracking affordability since 2012.
The report attributes the data to rates hitting a 20-year high during Q4, along with the high cost of building homes due to worker and buildable lot shortages, as well as regulatory impact.
Still, NAHB Chairman Alicia Huey noted that 2024 should bring more positive buyer conditions.
“Affordability conditions should show some gradual improvement this year, as mortgage rates peaked in the fourth quarter of 2023 and are now well below 7%,” she said.
Rates averaged 6.64% last week and have stayed in the mid-6% range for about two months now.
Prices for both new and existing homes posed problems for buyers in Q4, with 85% of metros seeing gains.
“Homeowners have benefited from housing wealth accumulation. However, many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year,” National Association of Realtors Chief Economist Lawrence Yun said about price appreciation data.
Lansing-East Lansing, MI, was the nation’s most affordable major housing market, while the Los Angeles-Long Beach-Glendale metro remained the nation’s least affordable market for the 13th straight quarter.
NAHB is fazing out its HOI in favor of a new report, the Cost of Housing Index, which will start up with Q1 2024 data.
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