Steady gains in home prices and rising mortgage rates across the United States contributed to weakening housing affordability in the year's third quarter.[IMAGE]
According to the ""Housing Opportunity Index"":http://www.nahb.org/news_details.aspx?newsID=16526 (HOI) published by the ""National Association of Home Builders"":http://www.nahb.org/default.aspx (NAHB) and ""Wells Fargo"":http://www.wellsfargo.com, 64.5 percent of new and existing homes from the start of July through the end of September were considered affordable to families earning the national median income of $64,400. That share is down from 69.3 percent in the second quarter, marking the biggest HOI decline since Q2 2004.
NAHB chairman Rick Judson said the third quarter's drop was the result of a ""'perfect storm' scenario.""
""With markets across the country recovering, 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,"" Judson said.[COLUMN_BREAK]
David Crowe, chief economist for NAHB, added that the decline may have been amplified by the current lending environment.
""Some of the decline in the affordability index could be the result of a loss in some more modest priced homes as tight underwriting standards have limited the purchases by moderate income families,"" he said. ""While affordability has come down from the peak in early 2012, the index still means a family earning a median income can afford 65 percent of homes recently sold.""
Indianapolis-Carmel, Indiana, and Syracuse, New York, tied as the country's most affordable major housing markets, with 93.3 percent of transactions fitting into those areas' median household income ($65,100 and $65,800, respectively).
Another Indiana market claimed the most affordable title among smaller metros: Kokomo, where 96.9 percent of home sales were affordable for the median income of $60,100.
At the other end of the scale, California's San Francisco-San Mateo-Redwood City metro held the spot for least affordable major market for the fourth quarter in a row. In that market, only 16 percent of homes sold in the third quarter were affordable to families earning the median income of $101,200.
Among smaller markets, the five least affordable metros last quarter were all located in the Golden State. Santa Cruz-Watsonville was declared the least affordable, with 20.3 percent of sales being considered affordable for a household earning the median income of $73,800.