In the final quarter of 2023, housing affordability in the United States remained stagnant, with mortgage rates hitting a more than 20-year high. Despite this, the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) reported that only 37.7% of new and existing homes sold during this period were affordable to families earning a median income of $96,300. This percentage mirrors the third-quarter figure, representing the lowest reading since NAHB began consistent tracking in 2012.
Transitioning from the HOI, the NAHB will introduce the Cost of Housing Index (CHI) in the first quarter of 2024. The CHI will analyze housing costs in the U.S. and metropolitan areas, indicating the portion of a typical family’s income required for mortgage payments. Additionally, a low-income CHI will be developed for families earning only 33% of the area’s median income.
NAHB Chairman Alicia Huey expressed optimism for gradual improvements in 2024 due to lower mortgage rates, which peaked in the fourth quarter of 2023.
“But even as lower interest rates track with our latest builder surveys that indicate an upturn in builder confidence in the single-family market, affordability conditions will remain challenging as builders contend with a high-cost regulatory environment and a chronic shortage of workers and buildable lots," Huey said.
Despite a national median home price decrease from $388,000 to $375,000, average mortgage rates surged from 7.13% to 7.44%, marking the highest rate in HOI series history.
“Even as overall inflation continues to moderate, shelter costs continue to put upward pressure on inflation, accounting for more than half the inflation gains in the latest Consumer Price Index,” NAHB Chief Economist Robert Dietz said. “The best way to tame shelter inflation and address America’s housing affordability challenges is to enact policies that reduce regulatory costs to help builders increase the supply of housing.”
Regional Affordability Trends
The most affordable major housing market in the fourth quarter was Lansing-East Lansing, Mich., with 79.3% of homes being affordable to families earning the area’s median income. Conversely, Los Angeles-Long Beach-Glendale, Calif., retained its position as the least affordable major housing market, with only 2.7% of homes affordable to median-income families.
In small housing markets, Bay City, Mich., ranked as the most affordable, while Santa Maria-Santa Barbara, Calif., was the least affordable.
The report underscores the regional disparities in housing affordability, particularly in California, where the top five least affordable markets were concentrated.
