Housing Affordability Remains Near Record High

Washington, D.C.—Housing affordability hovered near its high during the second quarter of 2011, according to National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) data that was recently released.

HOI measures the percentage of all new and existing homes sold that were affordable to families earning the area median income. A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home, according to the National Association of Realtors.

The study indicated that 72.6 percent of all homes sold in the second quarter of the year were affordable to families earning the national median income of $64,200. This is the 10th consecutive quarter that the HOI has hovered near its highest level.

HOI dipped slightly from its high of 74.6 percent, which was seen in the first quarter of 2011, but it remained above the 70 percent threshold achieved for the first time ever in the first quarter of 2009. Before that time, HOI never reached higher than 69.6 percent, where it peaked in the first quarter of 1999.

The national median home price for the second quarter was $172,000, compared to $165,000 in the first quarter.

“Normally, increased affordability of owner-occupied housing—as indicated by the NAHB/Wells Fargo Housing Opportunity Index—would tilt the balance slightly in favor of single-family vs. multifamily rental housing,” Paul Emrath, vice president of survey and housing policy research at NAHB, tells MHN.

Fortunately—at least for the multifamily industry—“many potential buyers are staying on the sidelines due to ongoing uncertainty about the economy and the relatively tight criteria for obtaining a mortgage,” adds Emrath. “The affordability of owner-occupied housing is currently not having much effect on the multifamily rental market.”

Once the economy recovers, however, Emrath believes that some renters will undoubtedly seek out home ownership. But, he adds, this will likely  “not [be] enough to drive the homeownership rate back up to 69 percent. However, we estimate that over 2 million household formations have been postponed for economic reasons, representing a large pent-up demand for rental housing, so an economic recovery would not on balance be a bad thing for the multifamily industry.”

The distribution of regions in the top 10 (most affordable) and bottom 10 (least affordable) showed the Northeast with four of the 10 large most affordable metros, and three large metros and two small metros named in the least affordable groupings. The Midwest also had four of the top 10 most affordable metros, with none of its major cities in the 10 least affordable groupings. The South, meanwhile, had one large metro and one small metro in the most top 10 most affordable, with one large metro and two small metros in the least affordable ranks. The West showed one large metro in the most affordable group, with six large metros and six small metros each in the least affordable groupings.

Kokomo, Ind. was the most affordable metro in the country during the second quarter, with an HOI of 95.8 percent.

Also ranking near the top of the most affordable major metro housing markets were Wheeling, WV-OH (94.7 percent); Lansing-East Lansing, MI (94.4 percent); Bay City, MI (94.3 percent); and Youngstown-Warren-Boardman, OH-PA (93.7 percent).

For the 13th consecutive quarter, New York-White Plains-Wayne, N.Y.-N.J., led the nation as the least affordable major housing market, with an HOI of 25.2 percent.

Other areas near the bottom of the affordability index included San Francisco-San Mateo-Redwood City, CA (27.5 percent); Santa Ana-Anaheim-Irvine, CA (40.5 percent); Ocean City, N.J. (40.9 percent) and Los Angeles-Long Beach-Glendale, CA (41.6 percent).