Housing Affordability Continues to Stay at Historic Lows

The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) came out and it showed that less than four in 10 new and existing homes — 37.7%, to be exact — that were sold in the fourth quarter of last year were considered “affordable,” based on the U.S. median household income of $96,300.

According to the NAHB, the index is defined as “the share of homes sold in that area that would have been affordable to a family earning the local median income, based on standard mortgage underwriting criteria.”

The affordability rate was unchanged from the previous quarter and was at a 10-year-low. The NAHB attributed the lack of affordable housing to higher mortgage rates, rising construction costs and onerous building regulations.

The HOI saw the highest mortgage rate in its history in the fourth quarter of 2023 with an average rate of 7.44%, according to Freddie Mac’s Primary Mortgage Market. That is up from 7.13% during Q3 2023. However, the median sales price from Q4 2023 was $375,000, down from $388,000 the previous quarter.

“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,” stated Robert Dietz, NAHB’s chief economist. “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.”

The only good thing, said NAHB Chair Alicia Huey, is that mortgage rates are now back below 7%. “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,” she said.

The NAHB has also announced that it is doing away with the HOI and replacing it with the Cost of Housing Index (CHI). The index measures housing costs in the U.S. and metropolitan areas once every three months.