US Housing Affordability Improved in Q1 but Still Trails Year-Over-Year Levels

According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released Thursday (6-8-23), substantial nominal wage gains (unadjusted for inflation) coupled with lower mortgage rates and home prices helped to boost housing affordability in 2023Q1. However, the report cautions that ongoing building materials supply chain issues and expected cooling of wage growth are raising concerns for affordability conditions in the year ahead.

According to the HOI, 45.6% of new and existing homes sold between January 1st and March 31st were affordable to families earning the US median income of $96,300. Although higher than in 2022Q4, the latest HOI is still significantly lower than it was a year earlier when it was at a reading of 56.9%—a reminder of ongoing housing affordability challenges.

Additional data released with the HOI shows that national US median home price fell to $365,000 in 2023Q1, down from $370,000 in 2022Q4. The average mortgage rates were 6.46% in 2023Q1, down from a series high of 6.80% in 2022Q4. The US median family income rose 7% from 2022 to 2023, from $90,000 to $96,300.