With mortgage rates reported to be at a three-year low and a healthy job market underway, housing affordability rose to its highest level in three years in the third quarter of 2019, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released yesterday.

In all, 63.6% 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 $75,500, reported NAHB. This is up from the 60.9% of homes sold in the second quarter of 2019 and the 62.6% in the first quarter of 2019 that were affordable to median-income earners.

The national median home price remained steady at $280,000 in the third quarter, flat from the previous quarter, but posted a jump from the first quarter when the median price was $260,000. At the same time, average mortgage rates fell from 4.07% in the second quarter to 3.73% in the third quarter, reaching a three-year low.

“With mortgage rates at historic lows, consumers are experiencing greater buying power and increased affordability,” said NAHB chairperson Greg Ugalde, a home builder and developer from Torrington, Conn. “Despite this positive development, builders still struggle with rising construction costs due to labor shortages and excessive regulations, which will continue to make housing affordability a major challenge.”

Scranton-Wilkes-Barre-Hazleton, Pa., was the nation’s most affordable major housing market, with 89.3% of all new and existing homes sold in the third quarter denoted as affordable to families earning the area’s median income of $67,000.

Monroe, Mich., was rated the nation’s most affordable smaller market, with 95.3% of homes sold in the third quarter marking as affordable to families earning the median income of $79,000.

San Francisco again ranked as the nation’s least affordable major market, with just 8.4% of homes sold in the third quarter of 2019 listed as affordable to families earning the area’s median income of $133,800. Other major metros at the bottom of the affordability chart were located in California.

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 13.4% of all new and existing homes sold were affordable to families earning the area’s median income of $74,100.

“While the Federal Reserve’s monetary policy has helped offset some of the rising construction costs, these headwinds are still affecting builders’ ability to increase inventory, particularly for entry-level buyers,” said NAHB chief economist Robert Dietz. “These higher production costs and other factors have caused a major decline in housing affordability over the past few years, and we expect that to remain a concern going forward.”

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