Housing affordability dipped as rising home prices offset a quarter-point drop in mortgage interest rates, according to the National Association of Home Builders and Wells Fargo.

The national median home price in the second quarter of 2017 rose to $256,000 from $245,000 in the first quarter, while average mortgage rates fell 25 basis points from 4.33% to 4.08%.

About 59.4% of homes sold between April and June were affordable to families earning the median U.S. income of $68,000. This suggests a slight decline in affordability, as 60.3% of homes that sold in the first quarter were affordable to median-income earners.

Housing starts are greater than expected this year, but still present challenges, especially cost.

"While builder confidence remains solid and sales and starts are running at a healthy clip above last year's levels, housing continues to confront persistent headwinds," said NAHB Chairman Granger MacDonald, a Texas homebuilder and developer, in a press release.

"Rising material prices, particularly lumber, along with chronic shortages of buildable lots and skilled labor are putting upward pressure on home prices and impeding a more robust housing recovery," he said.

As the job market continues to gain steam, housing demand increases. All the while, growing incomes and attractive mortgage rates help keep housing somewhat affordable by partially offsetting home price appreciation, according to NAHB Chief Economist Robert Dietz.

Youngstown-Warren-Boardman, Ohio-Pa., was rated the country's most affordable major housing market for the third consecutive quarter; for the 19th consecutive quarter, San Francisco-Redwood City-South San Francisco, Calif., was rated the least affordable.

The housing market will continue to make gradual gains in 2017 as demand continues to outpace supply.

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