Growing incomes and low mortgage rates are helping to prop up housing affordability and offset rising home prices, according to the newly released National Association of Home Builders/Wells Fargo Housing Opportunity Index. A quarter-point drop in interest rates in the second quarter helped to make homes more affordable to more consumers. Between the beginning of April and the end of June, 59 percent of new and existing homes were affordable to families earning the U.S. median income of $68,000.
Read more: NAR’s Affordable Housing Index
The national median home price increased to $256,000 in the second quarter from $245,000 in the first quarter, according to the index. Average mortgage rates fell 25 basis points to 4.08 percent in the second quarter from 4.33 percent in the first quarter. “The job market continues to gain steam, and this is boosting housing demand,” says NAHB chief economist Robert Dietz. “Home prices will continue to rise as inventory remains tight. The NAHB expects the housing market will continue to make gradual gains in 2017.”
The most affordable major housing market in the country in the second quarter was Youngstown-Warren-Boardman, Ohio-Pa., which has kept its title as most affordable for the third consecutive quarter. There, 93.3 percent of all new and existing homes are affordable to families earning the area’s median income of $54,600. Rounding out the top five most affordable major markets are Syracuse, N.Y.; Dayton, Ohio; Buffalo-Cheektowaga-Niagara Falls, N.Y.; and Scranton-Wilkes Barre-Hazelton, Pa.
The nation’s most affordable smaller market is Kokomo, Ind., where 96.9 percent of homes in the second quarter were affordable to families earning the median income of $62,500. Other smaller markets that topped the list were Davenport-Moline-Rock Island, Iowa-Ill.; Glen Falls, N.Y.; Watertown-Fort Drum, N.Y.; and Monroe, Mich.
On the other hand, the nation’s least affordable major housing market, for the 19th consecutive quarter, was San Francisco-Redwood City-South San Francisco, Calif. Just 7.6 percent of homes in the second quarter were considered affordable to families earning the area’s median income of $113,100. All five of the least affordable small housing markets were in California. In Salinas, Calif., which topped the list, 12.4 percent of all new and existing homes were affordable to families earning the area’s median income of $63,100.