Real Estate

Home affordability drops in second quarter

Only 69.3% of homes were deemed affordable

Affordability throughout the country fell notably as the recovering markets experienced significant firming of home prices in the second quarter of 2013.

Data from the National Association of Home Builders/Wells Fargo (WFC) Housing Opportunity Index revealed that 69.3% of new and existing homes sold from April through June were affordable to families that brought in the U.S. median income of $64,400.

In the first quarter of the year, 73.7% of homes sold were considered affordable to households bringing in the median income. This is also the first time since late 2008 that the measure has dropped below 70%.

"Housing affordability has been hovering near historic highs for the past several years, largely due to exceptionally favorable mortgage rates and low prices during the recession," observed NAHB Chairman Rick Judson.

"Now that markets across the country are recovering, home values are strengthening at the same time that the cost of building homes is rising due to tightened supplies of building materials, developable lots and labor,” he added.

NAHB Chief Economist David Crowe noted that rising home prices indicate that the health in housing markets is improving. The median price of all new and existing U.S. homes sold in this year’s second quarter, at $202,000, was well ahead of the second quarter of 2012, when the median price was $185,000.

"Together with rising mortgage rates, this contributed to affordability slipping to the lowest level in more than four years. Such movement would be less concerning were it not for ongoing discussions regarding potential changes to the mortgage interest deduction and federal support for the secondary mortgage market, both of which play enormous roles in keeping homeownership affordable,” said Crowe.

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