Another casualty of the coronavirus? Housing affordability. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), the pandemic was a contributing factor to a decline in U.S. median income and housing affordability in the first quarter of 2020.
Of new and existing homes sold between the start of January and end of March, 61.3 percent were affordable for families earning a median income of $72,900. In the fourth quarter of 2019, this percentage was slightly higher, at 63.2 percent, with the median income at $75,500.
“The pandemic has clearly hurt housing affordability by exacerbating existing supply chain problems and slowing home construction during a time of underbuilding,” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J.
“The affordability decline is tied to the coronavirus outbreak as job losses surged and median income fell due to reduced economic activity,” said NAHB Chief Economist Robert Dietz. “However, housing demand started the year strong, interest rates are expected to stay at low levels for the foreseeable future and home prices have held remarkably stable over the past four quarters. As virus mitigation efforts show signs of success, workers will return to their jobs, and housing will help lead the economy to higher ground.”
Affordability challenges are more apparent in certain markets, with all five of the least affordable markets located in California: Anaheim-Santa Ana-Irvine; San Diego-Carlsbad; and Oxnard-Thousand Oaks-Ventura.
The top five most affordable major housing markets are currently Indianapolis-Carmel-Anderson, Ind.; Harrisburg-Carlisle, Pa.; Toledo, Ohio; and Albany, Schenectady-Troy, N.Y.
*The Department of Housing and Urban Development’s original estimates of median family income for 2020 were developed prior to the COVID-19 pandemic. To account for the pandemic’s effects, the HUD estimates were reduced consistent with NAHB’s economic forecast for 2020. As a result, the 2020 national median income estimates used in the HOI calculations ($72,900) are 7.1 percent lower than the initial national 2020 estimates ($78,500) from HUD.