U.S. housing affordability increased slightly in the first quarter of 2017 due to rising wages and moderating home prices despite increasing mortgage rates, according to National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).
Between January and March, 60.3 percent of new and existing homes sold were affordable to families earning $68,000, which is the U.S. median income. This is up from the fourth quarter of 2016 when 59.9 percent of homes sold were affordable to median income earners. However, this is down from the first quarter of 2016, when 65.0 percent of homes were affordable to median income earners.
The national median home price was $245,000 in the first quarter, which is down from $250,000 in quarter four. However, the average mortgage rate rose from 3.84 percent to 4.33 percent.
“Ongoing job growth continues to fuel demand for housing, while wage growth is helping to offset the effects of rising mortgage rates and keep home prices affordable,” said NAHB Chief Economist Robert Dietz. “NAHB anticipates that housing will continue on a gradual, upward path throughout the year.”
In the Chicago-Naperville-Arlington Heights metropolitan division, 62.6 percent of home sales were affordable to families earning the local median income of $77,300. The median home price in the area was $228,000 for the first quarter of this year.
NAHB uses annual median family income estimates published by the Department of Housing and Urban Development and assumes a family can afford to spend 28 percent of its gross income on housing.