Housing Affordability Falls to Lowest Level Since Great Recession
Alistair Berg via Getty Images
Inflation, low inventory and rising mortgage rates are hampering housing availability for families nationwide, according to a report. But there are a few cities in the Midwest and Pennsylvania where housing is still reasonable.
In a perfect storm of high inflation, low inventory and rising mortgage rates, housing affordability has fallen to its lowest level since the Great Recession, according to a recent report from the National Association of Homebuilders.
According to the report–which used data from the Wells Fargo Housing Opportunity Index–42.8% of new and existing homes sold in the second quarter of this year were affordable for families earning the national median income of $90,000 annually.
That figure is a sharp drop from the first quarter, which found that 56.9% of homes sold were affordable for median-income families.
There are several factors contributing to the housing affordability crisis, including supply chain disruptions that increase costs of building materials, making keeping up with demand difficult, the report said.
“Policymakers need to focus on mending broken building material supply chains and reducing ineffective zoning and other regulatory policies to help bend the cost curve and enable builders to boost attainable housing production,” said Robert Dietz, chief economist for the association, in a statement.
Additionally, mortgage rates jumped from an average of 3.86% in the first quarter to 5.33% in the second. It’s the largest quarterly mortgage rate increase since the Housing Opportunity Index began in 2012, the report said.
The national median price for a home in the U.S. hit an all-time high of $390,000, surpassing the first quarter’s initial record of $365,000.
All of the country’s least affordable housing markets are in California, the report said.
But the situation in other parts of the country is not quite so dire. In some areas, the majority of homes sold in the second quarter were affordable, and several communities in the midwest were found to have the most affordable markets.
The Most and Least Affordable Markets
Of major housing markets in the United States—defined as municipalities with populations of at least 500,000—East Lansing, Michigan, topped the charts as the country’s most affordable as 85.2% of all homes sold there were affordable to families earning the area’s median income of $89,500.
Ranking just behind East Lansing for most affordable major housing markets were:
- Indianapolis-Carmel-Anderson, Indiana
- Toledo, Ohio
- Harrisburg-Carlisle, Pennsylvania
- Scranton-Wilkes-Barre, Pennsylvania
As for the country’s most affordable small markets, Elmira, New York, takes first place. There, 91.8% of homes sold in the second quarter were affordable for families earning the area’s median income of $77,900.
Other small markets that made the top-five most affordable are:
- Cumberland, Maryland/West Virginia
- Wheeling, West Virginia/Ohio
- Utica-Rome, New York
- Davenport-Moline-Rock Island, Iowa/Illinois
Meanwhile, the housing market in Los Angeles-Long Beach-Glendale, California, maintained its title as the least affordable in the country for the seventh straight quarter, as only 3.6% of the homes sold between the beginning of April and the end of June were affordable for families earning the area’s median income of $90,100.
Also making the list of least affordable major housing markets—all in California—are:
- Anaheim-Santa Ana-Irvine
- San Diego-Chula Vista-Carlsbad
- San Francisco-San Mateo-Redwood City
- San Jose-Sunnyvale-Santa Clara
For more information from the report click here.
Molly Bolan is an assistant editor for Route Fifty.
NEXT STORY: Your Check's in the Mail: States Give Tax Refunds to Cushion Inflation