The increase in US mortgage rates seen in the first quarter of 2018 was more than offset by strong wage growth.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) reveals that housing affordability improved in the first three months of the year; 61.6% of new and existing homes sold were affordable for families earning the US median income of $71,900. This was an increase from 59.6% at the end of Q4 2017.
“At the national level, median family income rose an impressive 5.7% to $71,900 in 2018 from $68,000 last year, and this wage growth helped to boost housing affordability,” said NAHB Chief Economist Robert Dietz. “A growing economy, along with tight inventories and increasing household formations, will lift housing production in the year ahead. But we also expect mortgage rates to continue to rise, and this will place downward pressure on affordability.”
Average mortgage rates jumped by nearly 30 basis points in the first quarter to 4.34% from 4.06% in the fourth quarter of 2017.
“Continued job growth, rising wages and strong consumer confidence are fueling housing demand. In turn, this should lead to more buyers entering the housing market in the coming months,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, builders continue to face headwinds that could impact affordability, including chronic labor and lot shortages, rising prices for building materials and excessive regulations.”