Affordability plummets on tight home supply and high building costs
Housing market conditions pushed affordability to a 10-year low in the second quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
Limited home supply is being outpaced by high homebuyer demand, putting upward pressure on property values. And while homebuilders could use this opportunity to put more inventory on the market, they're facing their own affordability hurdles with high costs to build.
"Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices," NAHB Chairman Randy Noel, a custom homebuilder from LaPlace, La., said in a press release.
"Meanwhile, tariffs on Canadian lumber imports into the U.S. are further eroding housing affordability. Builders are struggling to manage these costs to ensure pricing does not outpace expected gains in wage growth," he added.
The national median home price shot to $265,000 from $252,000 from the first to second quarter. This marks the highest median price since NAHB and Wells Fargo began recording this data. Simultaneously, mortgage rates rose to 4.67% from 4.34% quarter-over-quarter.
"Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018," said NAHB Chief Economist Robert Dietz. "However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability."
Syracuse, N.Y., was the nation's most affordable major housing market, while San Francisco was the least for the third straight quarter.