ConDig (10-Aug–23). Housing affordability dipped in the second quarter amid rising home prices and interest rates, elevated construction costs, low existing inventory and solid demand, according to latest figures from the National Association of Home Builders (NAHB).

The NAHB/Wells Fargo Housing Opportunity Index (HOI), showed that 40.5% of new and existing homes sold between the beginning of April and end of June were affordable to families earning the US median income of $96,300. This was down from 45.6% compared with the first quarter of this year, and the second-lowest reading since NAHB began tracking affordability on a consistent basis in 2012. 

It was also lower than the score of 42.8% for the second quarter of last year.

The HOI showed that the national median home price increased to $388,000 in the second quarter, up from $365,000 in the previous quarter. Meanwhile, average mortgage rates were 6.59% in the second quarter, up from 6.46% in the first quarter.

“While builders continue to face a number of affordability challenges, including a shortage of distribution transformers, elevated construction costs and a lack of skilled workers, they remain cautiously optimistic about market conditions,” said NAHB chairman Alicia Huey.

“A lack of existing inventory is fueling demand for new construction, and mortgage rates are expected to stabilize in the weeks and months ahead as the Federal Reserve nears the end of its tightening cycle.”

It comes as latest figures from the Commerce Department showed that residential construction was at a seasonally adjusted annual rate of $856.3 billion in June, 0.9% above the revised May estimate of $848.6 billion.