Low Housing Affordability Remains Steady for Third Quarter of 2021

In the third quarter of 2021, housing affordability remained at its lowest level in nearly a decade as lower mortgage rates were offset by higher home prices to keep rates steady, NAHB’s Eye on Housing reports.

As the national median home price increased to a record $355,000 during the third quarter, mortgage rates fell by 14 basis points, though a recent jump could affect affordability into 2022. Supply-chain disruptions and the potential for higher interest rates in the coming months could further worsen housing affordability for the remainder of 2021.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), 56.6 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $79,900. This is unchanged from the 56.6% of homes sold in the second quarter of 2021 and remains the lowest affordability level since the beginning of the revised series in the first quarter of 2012.

The HOI shows that the national median home price increased to a record $355,000 in the third quarter, up $5,000 from the second quarter and $35,000 from the first quarter. Meanwhile, average mortgage rates fell by 14 basis points in the third quarter to 2.95% from the rate of 3.09% in the second quarter. However, mortgage rates are currently running above 3.1%, and this higher trend could affect affordability later this year and into 2022.

Lansing, East Lansing, Mich. was the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. There, 89.1% of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $79,100.