Affordability got better for mortgage borrowers at the start of 2019, but housing inventory constraints limited the degree of improvement, according to the National Association of Home Builders and Wells Fargo.
Falling mortgage rates, lower home prices and considerable income growth helped push up homebuyer affordability on a consecutive-quarter basis; but low levels of housing supply, particularly where starter homes are concerned, didn't change levels much from an annual perspective.
As a result, 61.4% of all homes sold between January and March were affordable to households earning the national median income of $75,500, according to NAHB and Wells Fargo's joint Housing Opportunity Index. This share is up from 56.6% in the fourth quarter, but is pretty much unchanged from 61.6% in 1Q18.
"While the recent rise in affordability is welcome news, builders continue to struggle with rising construction and development costs stemming from excessive regulations, a lack of buildable lots and a shortage of construction workers," NAHB Chairman Greg Ugalde, a Torrington, Conn.-based homebuilder and developer, said in a press release. "This means that housing affordability is going to continue to be a challenge throughout 2019, particularly in high-cost markets."
The national median home price did dip down to $260,000 in the first quarter from $262,500 in the fourth as interest rates declined 25 basis points to 4.64%. But property values are still up year-to-year due to inventory concerns that include high land prices and increasing costs to build.
"Though the Federal Reserve's more dovish monetary policy stance has lowered interest rates, income growth still has not kept up with rising construction costs and home price appreciation in recent years," said NAHB Chief Economist Robert Dietz. "Today four out of every 10 new and existing home sales are not affordable for a typical family."