Mortgage rates that hit more than a 20-year high, coupled with elevated construction costs and excessive regulatory costs, left housing affordability in the fourth quarter of 2023 virtually unchanged from the previous quarter and holding near its lowest level in more than a decade.
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), just 37.7 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $96,300.
The rate is just below the 37.4 percent posted in the third quarter of 2023, which was the lowest reading since NAHB began tracking affordability on a consistent basis in 2012.
“Affordability conditions should show some gradual improvement this year,” said NAHB chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. She pointed to a dip in mortgage-interest rates since the start of the year, down from an average 7.44 percent in the fourth quarter.
For the 13th straight quarter, the Los Angeles metropolitan area remained the nation’s least affordable major housing market (with a population of 500,000 or more). There, just 2.7 percent of the homes sold during the fourth quarter were affordable to families earning the area’s median income.
Lansing, Mich., was the nation’s most affordable major housing market. There, 79.3 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the area’s median income.
