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ArlingtonReal EstateHousing affordability takes a tumble, locally and nationwide

Housing affordability takes a tumble, locally and nationwide

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Soaring building material costs, high demand and low inventory have added tens of thousands of dollars to the price of a new home and caused housing affordability nationally to fall to its lowest level in nearly a decade during the second quarter of 2021.

And while affordability is down in the Washington region, too, more people are able to purchase typical homes than in many other parts of the country.

According to the newly released National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), 56.6 percent of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $79,900.

This is down sharply from the 63.1 percent of homes sold in the first quarter of 2021 and the lowest affordability level since the beginning of the revised series in the first quarter of 2012.


“Runaway construction-cost growth, such as ongoing elevated prices for oriented strand board that has skyrocketed by nearly 500 percent since January 2020, continue to put upward pressure on home prices,” said NAHB chairman Chuck Fowke, a custom builder from Tampa.

“Recent NAHB analysis shows that higher costs for lumber products have added nearly $30,000 to the price of an average new single-family home,” said NAHB chief economist Robert Dietz. “With the U.S. housing market more than 1 million homes short of what is needed to meet the nation’s demand, policymakers need to focus on supply-side solutions that will enable builders to increase housing production and rein in rising home prices.”

The HOI report notes that the national median home price surged to a record $350,000 in the second quarter, up $30,000 from the first quarter. This is the largest quarterly price hike in the history of this series.

Meanwhile, average mortgage rates increased by 13 basis points in the second quarter to 3.09 percent from the rate of 2.96 percent in the first quarter. However, mortgage rates more recently are running at 2.8 percent, which has provided some support for housing demand in recent weeks.

In the Washington region, 70 percent of all homes in the market were affordable to those making the median household income. While that is down from 76.6 percent in the first quarter of 2021, it is in line with traditional norms going back to the survey’s origination.

Pittsburgh was the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. In Pittsburgh, 90.6 percent of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $84,800.

Rounding out the top five affordable major housing markets were Lansing-East Lansing, Mich.; Youngstown-Warren-Boardman, Ohio-Pa.; Scranton-Wilkes-Barre-Hazleton, Pa.; and Harrisburg-Carlisle, Pa.

Meanwhile, Cumberland-Md.-W.Va., was rated the nation’s most affordable smaller market, with 94 percent of homes sold in the second quarter being affordable to families earning the median income of $60,800.

Smaller markets joining Cumberland at the top of the list included Davenport-Moline-Rock Island, Iowa-Ill.; Sierra Vista-Douglas, Ariz.; Lexington Park, Md.; and Fairbanks, Alaska.

For the third straight quarter, Los Angeles-Long Beach-Glendale, Calif., remained the nation’s least affordable major housing market. There, just 8.4 percent of the homes sold during the second quarter were affordable to families earning the area’s median income of $78,700.

In fact, the five least affordable major markets were all located in California. In descending order after Los Angeles:San Francisco-Redwood City-South San Francisco; Anaheim-Santa Ana-Irvine; San Diego-Carlsbad; and Oxnard-Thousand Oaks-Ventura rounded out the top five.

Four of the five least affordable small housing markets were also in the Golden State. However, at the very bottom of the affordability chart was Corvallis, Ore., where 7.2 percent of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $93,000.

In descending order, other small markets at the lowest end of the affordability scale included Salinas, Calif.; Napa, Calif.; Santa Cruz-Watsonville, Calif.; and San Luis Obispo-Paso Robles-Arroyo Grande, Calif.

Full details and data can be found at www.nahb.org/hoi for tables, historic data and details.

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