Home prices strengthened in the second quarter of this year, leading to a slight decline in housing affordability. Ninety-two percent of metro areas posted gains in home prices.
The latest National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) reports that 73.8 percent of all new and existing homes sold are now affordable to families earning the national median income of $65,000.
This is a decline from the previous record high of 77.5 percent seen in the first quarter of 2012.
"While interest rates and overall housing affordability remain very favorable on a historic basis, the decline in the latest HOI is a positive development because it is another signal that the housing recovery is starting to take root, and it lends needed confidence to prospective buyers and sellers who have been reluctant to move forward in the current marketplace," said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. Where are the most affordable markets? This award goes to Youngstown-Warren-Boardmen, Ohio-PA, where 93.4 percent of homes sold during the period were affordable for that area’s median family income of $55,700.
The NAHB also reports that "among the most affordable major housing markets in respective order were Dayton, Ohio; Buffalo-Niagara Falls, N.Y.; Indianapolis-Carmel, Ind.; and Modesto, Calif."
Smaller markets also have some record-breaking rates of housing affordability. Fairbanks, Alaska, has an affordable rate of 98.7 percent for their median income of $92,900. Other smaller housing markets at the top of the index include Mansfield and Springfield, Ohio; Carson City, Nev.; and Kokomo, Ind.
Rising home prices are reason for cheer. The National Association of Realtors (NAR) reports that the median existing single-family home price has risen in 110 out of 147 metro statistical areas based on closing for the second quarter.
A lack of inventory, however, is limiting buyer choices. Lawrence Yun, NAR chief economist, said home prices are set to rise in even more markets during upcoming quarters. "It’s most encouraging to see a growing number of metro areas with rising median prices, which is improving the equity position of existing homeowners."
"Inventory has been trending down and home builders are still under-producing in relation to growing demand," he said. "Some of the improvement in prices is due to a smaller share of sales in low price ranges where inventory is tight."
The national median existing single-family home price was $181,500 in the second quarter, up 7.3 percent from $169,100 in the second quarter of 2011. This is the strongest year-over-year increase since the first quarter of 2006 when the median price rose 9.4 percent.