Housing Affordability Hits 10-Year Low in Second Quarter

Rising home prices and interest rates pushed housing affordability to a 10-year low in the second quarter of 2018, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released today.

In all, 57.1 percent of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $71,900. This is down from the 61.6 percent of homes sold in the first quarter that were affordable to median-income earners and the lowest reading since mid-2008.

The national median home price jumped from $252,000 in the first quarter of 2018 to $265,000 in the second quarter—the highest quarterly median price in the history of the HOI series. At the same time, average mortgage rates jumped by more than 30 basis points in the second quarter to 4.67 percent from 4.34 percent in the first quarter.

“Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Meanwhile, tariffs on Canadian lumber imports into the U.S. are further eroding housing affordability. Builders are struggling to manage these costs to ensure pricing does not outpace expected gains in wage growth.”

“Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018,” said NAHB Chief Economist Robert Dietz. “However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability.”

Syracuse, N.Y., was the nation’s most affordable major housing market. There, 89.1 percent of all new and existing homes sold in the second quarter were affordable to families earning the area’s median income of $74,100. Meanwhile, the nation’s most affordable smaller market was also located in the Empire State. In Elmira, N.Y., 97 percent of homes sold in the second quarter were affordable to families earning the median income of $71,000.

Rounding out the top five affordable major housing markets in respective order were Scranton-Wilkes Barre-Hazleton, Pa.; Harrisburg-Carlisle, Pa; Indianapolis-Carmel-Anderson, Ind.; and Youngstown-Warren-Boardman, Ohio-Pa.

Smaller markets joining Elmira at the top of the list included Kokomo, Ind.; Davenport-Moline-Rock Island, Iowa-Ill.; Cumberland, Md.-W.Va.; and Wheeling, W.Va.-Ohio.

San Francisco, for the third straight quarter, was the nation’s least affordable major market. There, just 5.5 percent of the homes sold in the second quarter of 2018 were affordable to families earning the area’s median income of $119,600.

Other major metros at the bottom of the affordability chart were located in California. In descending order, they included Los Angeles,-Long Beach-Glendale; Anaheim-Santa Ana-Irvine; San Jose-Sunnyvale-Santa Clara; and San Diego-Carlsbad.

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 9.8 percent of all new and existing homes sold were affordable to families earning the area’s median income of $69,100.

In descending order, other small markets at the lowest end of the affordability scale included Santa Cruz-Watsonville; Napa; San Luis Obispo-Paso Robles-Arroyo Grande; and San Rafael.

Please visit www.nahb.org/hoi for tables, historic data and details.

Editor’s Note: The NAHB/Wells Fargo Housing Opportunity Index (HOI) is a measure of the percentage of homes sold in a given area that are affordable to families earning the area’s median income during a specific quarter. Prices of new and existing homes sold are collected from actual court records by Core Logic, a data and analytics company. Mortgage financing conditions incorporate interest rates on fixed- and adjustable-rate loans reported by the Federal Housing Finance Agency.

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Statement from NAHB Chairman Randy Noel on States Receiving Section 404 Permitting Authority

Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La., today issued the following statement in support of the Trump administration’s announcement that clarifies over which waters states can assume Clean Water Act Section 404 permitting authority rather than the federal government:

“NAHB commends this latest action by the Trump administration to enact common-sense solutions to reduce regulatory burdens for small businesses. The Army Corps of Engineers’ recent memorandum will help to promote the federal/state partnership envisioned by the Clean Water Act, reduce duplicative administrative burdens and create a more streamlined authorization process for builders and developers whose projects occur near wetlands. In turn, this will boost housing affordability while also protecting our nation’s wetlands and waterways.

“We are hopeful that by providing this clarity, more states will take steps to assume Section 404 permitting authority.”

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CyrusOne Building Out European Platform

Gary Wojtaszek, president and CEO of CyrusOne (NASDAQ: CONE), participated in a video interview at Nareit’s REITweek: 2018 Investor Conference in New York.

Wojtaszek said that the growth that CyrusOne has seen in the United States during the last few years is now beginning to land on European shores.

“We’re trying to build that European platform,” he said. “Our first move was the acquisition of Zenium.”

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FTSE Nareit All REITs Index Up 0.8% in July

REITs rose modestly in July, with data center REITs and regional mall REITs posting the strongest returns during the month.

The total returns of the FTSE Nareit All REITs Index rose 0.8 percent in July, while the S&P 500 rose 3.7 percent. The total returns of the FTSE Nareit Mortgage REIT Index gained 3.8 percent in July.

The yield on the 10-year Treasury note was 0.1 percent higher in July.

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55+ Housing Market Shows Continued Strength in Second Quarter

Builder confidence in the single-family 55+ housing market continued to be in positive territory in the second quarter of 2018, according to the National Association of Home Builders (NAHB) 55+ Housing Market Index (HMI) which was released today. The index increased one point to 67.

The 55+ HMI is broken down to measure two segments of the 55+ housing market: single-family homes and multifamily condominiums. Each segment of the 55+ HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic).

“Builders and developers continue to see demand from consumers for homes in the 55+ housing sector,” said Chuck Ellison, chairman of NAHB’s 55+ Housing Industry Council and Vice President-Land of Miller & Smith in McLean, Va. “However, increases in building material costs have made it challenging to meet this demand.”

When compared to the previous quarter, among the three single-family components of the 55+ HMI, present sales increased three points to 73, sales expected in the next six months dropped three points to 77 and traffic of prospective buyers fell four points to 47.

The 55+ multifamily condo HMI dropped seven points to 57, however, it is still the second-highest reading since the inception of the index in 2008. All three 55+ condo HMI components decreased in the second quarter: Present sales fell six points to 61, sales expected in the next six months dropped seven points to 63 and traffic of perspective buyers declined 11 points to 44.

Conversely, all four components of the 55+ multifamily rental market went up in the second quarter: Present production rose six points to 65, production expected in the next six months jumped 11 points to 68, present demand for existing units increased four points to 72 and demand expected in the next six months rose seven points to 75. 

“Strong economic growth and rising home owner wealth are allowing consumers to sell their current homes and buy or rent homes in 55+ communities,” said NAHB Chief Economist Robert Dietz. “However, builders need to manage rising building material costs, especially for lumber, in order to continue providing housing at competitive prices.”

For the full 55+ HMI tables, please visit nahb.org/55hmi.

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