Housing Affordability Posts Solid Gain
Combined with lower mortgage rates and home prices, nominal wage gains (unadjusted for inflation) helped to boost housing affordability at the beginning of the year. However, with building material supply chain issues ongoing and expected wage growth cooling, concerns for affordability remain.
According to the National Association of Home Builders (NAHB), the NAHB/Wells Fargo Housing Opportunity Index (HOI), 45.6% of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $96,300. This is up from 38.1% posted in the fourth quarter of last year, which was the lowest level since NAHB began tracking affordability on a consistent basis in 2012. However, the first quarter 2023 HOI reading remains significantly lower than the first quarter 2022 score of 56.9%, a reminder of ongoing housing affordability challenges.
“An uptick in housing affordability in the first quarter of 2023 corresponds to a rise in builder sentiment over the same period as well as an increase in single-family permits,” said NAHB Chairman Alicia Huey, a custom home builder from Birmingham, Alabama. “And while buyer conditions improved at the beginning of the year, builders continue to wrestle with a host of affordability challenges. These include a shortage of distribution transformers and concrete that are delaying housing projects and raising construction costs, a lack of skilled workers and tightening credit conditions.”
