Industry Update: Housing Affordability

Industry Update: Housing Affordability

Posted 11/21/2013
401(K) 2013 / Foter.com / CC BY-SA

Higher home prices and interest rates continued to dampen housing affordability across the nation in the third quarter, but according to a report released last week by the National Association of Home Builders, Phoenix is faring better than many places.

The greater Phoenix housing affordability index dropped to 70.6 in the third quarter, down from 76.2 in the second quarter and 80.9 a year ago. This compares to a national score of 64.5 on the NAHB/Wells Fargo Housing Opportunity Index – down from 69.3 in the second quarter, and the biggest decline since the second quarter of 2004.

The index is a measure of the percentage of homes sold in a given area that are affordable to families earning the area’s median income during a specific quarter. Though metro Phoenix housing affordability took a hit along with the rest of the nation, experts agree that when nearly three-quarters of the homes sold over the last three month are considered affordable to median income families, the outlook is favorable for local home buyers.

NAHB Chief Economist David Crowe says that while affordability is not what it was at its peak in early 2012, home ownership remains within reach for most interested buyers. He blamed the decline on tighter underwriting standards, higher mortgages rate and a year-long steady climb in prices.

Indianapolis-Carmel, Ind., and Syracuse, N.Y., tied for the title of most affordable major housing markets in the third quarter, while the San Francisco-San Mateo-Redwood City, Calif., area was the least affordable among the major submarkets, according to the index. Visit the NAHB’s website for tables, historic data and details.