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Housing Affordability Eroded Dramatically by 'Perfect Storm' in Q3

by devteam November 14th, 2013 | Share

Housing affordability suffered itsrnbiggest hit in nearly ten years during the third quarter of 2013 the NationalrnAssociation of Homebuilders (NAHB) and Wells Fargo said today.  Their Housing Opportunity Index (HOI) for thernquarter was 64.5 percent, down from 69.3 percent in the second quarter.  This means that 64.5 percent of new andrnexisting homes sold in the U.S. between the beginning of July and end ofrnSeptember were affordable to families earning the U.S. median income of $64,400.</p

 “Housing affordability is beingrnnegatively affected by a ‘perfect storm’ scenario,” observed NAHB Chairman RickrnJudson.  “With markets across the countryrnrecovering, home values are strengthening at the same time that the cost ofrnbuilding homes is rising due to tightened supplies of building materials,rndevelopable lots and labor.”     <br / <br /"The decline in affordability is the result of higher mortgage rates and thernmore than year-long steady increase in home prices," observed NAHB ChiefrnEconomist David Crowe. "While affordability has come down from the peak inrnearly 2012, the index still means a family earning a median income can affordrn65 percent of homes recently sold.  Some of the decline in thernaffordability index could be the result of a loss in some more modest pricedrnhome sales as tight underwriting standards have limited the purchases byrnmoderate income families."</p

The most affordable major housing markets were Indianapolis-Carmel, Indiana,rnand Syracuse, New York which tied with 93.3 percent of all new and existingrnhomes being affordable to families earning the areas’ median incomes of $65,100rnand $65,800 respectively. Meanwhile, Kokomo, Indiana was the most affordablernsmaller market, with 96.9 percent of homes sold in the third quarter affordablernto those earning the median income of $60,100.</p

Other affordable major housing markets in descending order were Youngstown-Warren-Boardman,rnOhio-Pennsylvania.; Harrisburg-Carlisle, Pennsylvania; and Buffalo-NiagararnFalls, New York. </p

Following Kokomo in smaller market affordability were Vineland-Millville-Bridgeton,rnNew Jersey; Davenport-Moline-Rock Island, Iowa-Illinois; and Bay City, Michigan.rn</p

For a fourth consecutive quarter, San Francisco-San Mateo-Redwood City wasrnthe least affordable major market.  Onlyrn16 percent of homes sold in the third quarter were affordable to families earningrnthe area’s median income of $101,200.  Other least affordable major markets were LosrnAngeles-Long Beach-Glendale; Santa Ana-Anaheim-Irvine; New York-WhiternPlains-Wayne, N.Y.-N.J.; and San Jose-Sunnyvale-Santa Clara, California. </p<pAll of the five leastrnaffordable small housing markets were in California. In Santa Cruz-Watsonvillern20.3 percent of all new and existing homes sold were affordable to families withrnincomes of $73,800. Other small markets at the lowest end of the affordabilityrnscale included San Luis Obispo-Paso Robles, Santa Rosa-Petaluma, Napa andrnSalinas.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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