Housing affordability has fallen to its lowest level in a decade, says the National Association of Home Builders.
NAHB asserts that rising building material costs, high demand and low inventory have added tens of thousands of dollars to the price of a new home.
The share of new and existing homes affordable to families making the US median income of $79,900 dropped to 56.6% in the second quarter from 63.1% in the first, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI).
At the same time, average mortgage rates increased by 13 basis points in the second quarter to 3.09% from the rate of 2.96% in the first quarter.
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The top five least affordable major markets were all located in California. In descending order, San Francisco-Redwood City-South San Francisco; Anaheim-Santa Ana-Irvine; San Diego-Carlsbad; and Oxnard-Thousand Oaks-Ventura rounded out the top five
Warning HOI data has shown higher costs for lumber products have added nearly $30,000 to the price of an average new single-family home and more than $90 per month for the rent of a new apartment unit, NAHB Chief Economist Robert Dietz is calling on policymakers to focus on supply-side solutions that will enable builders to increase housing production and rein in rising home prices.
Earlier this summer, Frank Martell, president and CEO of CoreLogic, predicted price rises would continue in 2021 and could very well push prospective buyers out of the market in many areas and slow home price growth over the next year.
Overall, prices rose 15.4% year-over-year in May. On a month-over-month basis, home prices increased by 2.3% compared to April 2021. Buyers continue to look for more space as appreciation of detached properties (17.2%) was nearly double that of attached properties (9.1%) in May.