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Calif. Leads U.S. Toward Reduced Home Affordability

Ogden-Clearfield, Utah (pictured), was rated the nation's most affordable major housing market for the fourth consecutive quarter, with 92.8 percent of all new and existing homes sold being affordable to families earning the area's median income of $70,800. This was down, however, from the 93.4 percent affordability measure posted in the previous quarter.

Recent reports from the National Association of Home Builders (NAHB) and the California Association of Realtors (C.A.R.) indicate that home affordability, a predictor of the housing market's future, is declining nationally and plummeting in the Golden State.

In an August 13 report, the NAHB/Wells Fargo Housing Opportunity Index (HOI) showed that 69.3 percent of all homes sold during the second quarter of 2013 were affordable to families earning the median national income of $64,400, down from 73.7 percent affordability in the first quarter. The HOI had not fallen below 70 percent since late 2008.

"Housing affordability has been hovering near historic highs for the past several years, largely due to exceptionally favorable mortgage rates and low prices during the recession," said NAHB chairman Rick Judson. "Now ... home values are strengthening at the same time that the cost of building homes is rising due to tightened supplies of building materials, developable lots and labor."

Ogden-Clearfield, Utah, led major markets in affordability for the fourth consecutive quarter; about 93 percent of median income earners in the area can afford a home. Other major U.S. housing markets at the top of the affordability chart in the second quarter included Indianapolis-Carmel, Indiana; Harrisburg-Carlisle, Pennsylvania; and Youngstown-Warren-Boardman, Ohio-Pennsylvania.

"Rising home prices signal the improving health in housing markets," NAHB Chief Economist David Crowe said. "Together with rising mortgage rates, this contributed to affordability slipping to the lowest level in more than four years. Such movement would be less concerning were it not for ongoing discussions regarding potential changes to the mortgage interest deduction and federal support for the secondary mortgage market, which play enormous roles in keeping homeownership affordable."

The national report followed an August 12 release from C.A.R. that found median homes in California accessible to only about 36 percent of the population in the second quarter of 2013, down from 44 percent in the first quarter and 51 percent in the second quarter of 2012. The new rate fell below 40 percent for the first time since the third quarter of 2008.

Far from Ogden or Clearfield, the San Francisco-San Mateo-Redwood City metro area in California marked a third consecutive quarter at the lowest spot among major markets on the affordability chart. Just 19.3 percent of homes sold in the second quarter in that area were affordable to families earning the area's median income of $101,200. Other major metros at the bottom of the affordability chart included Los Angeles-Long Beach-Glendale; and Santa Ana-Anaheim-Irvine, and New York-White Plains-Wayne, New York and New Jersey.

The NAHB/Wells Fargo HOI is available at this link, and the C.A.R. report is available here.

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June 27, 2019, 1:58 am PDT

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