Mortgages Blog

Finance Blogs » Mortgages Blog » Home affordability drops

Home affordability drops

By Judy Martel ·
Thursday, August 15, 2013
Posted: 7 pm ET

Steadily rising prices signal happy days for home sellers recovering from the beaten-down values of the recession. But it's a different story for buyers. Coupled with higher mortgage rates, they're finding it more difficult to afford a home.

Home affordability nationwide slipped during the second quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

"Housing affordability has been hovering near historic highs for the past several years, largely due to exceptionally favorable mortgage rates and low prices during the recession," NAHB Chairman Rick Judson said in a release.

Prices rise, affordability falls

According to the index, 69.3 percent of new and existing homes sold during the second quarter were affordable to families earning the U.S. median income of $64,400, compared with 73.7 percent of such homes sold during the first quarter. The second-quarter drop also marks the first time the index has fallen below 70 percent since late 2008.

The second-quarter median price of all new and existing homes sold in the U.S. was $202,000, compared with the second-quarter median price of $185,000 a year ago.

Could it get worse?

David Crowe, NAHB chief economist, noted in a release that while rising mortgage rates and home prices are contributing to the drop in home affordability, there are other, looming factors that are a concern. Congressional discussions about reducing the mortgage interest tax deduction along with President Barack Obama's proposal to promote private investment in mortgages could make them more expensive for borrowers.

Keep up with your wealth and mortgages, and follow me on Twitter @JudyMartel.

Get real-time rate quotes with Bankrate's Mortgage app.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
Paul Sussmann
August 23, 2013 at 5:55 pm

There goes the myth that rising prices of real estate are a sign of wealth. Here is a fundamental difference between this nation and China: The rise in price of real estate is viewed by them as a problem, not a sign of wealth. Is it a sign of wealth if someone is in a home he can ill afford to amortise and ill afford to maintain? I think not. That President Barack Obama thinks rising prices of real estate and a return to private mortgage investment [actually packaging of mortgages into securities packages by the people on Wall Street to whom he prostitutes himself for money - the same people who almost brought this country to its financial knees] shows him to be either an idiot or completely owned by those financial criminals.

Hugh Mann
August 23, 2013 at 5:32 pm

The mortgage-interest deduction is intended to promote home ownership. It should be limited to only one's principal residence and to mortgages not exceeding $500,000. That would focus on its real intent.

August 23, 2013 at 4:55 pm

Dave, apparently you don't make THAT great of a salary, because if you did you would know that you stop paying into Social Security after your wages reach $113, you are not "paying way more than your fair share just because you can" are paying your fair share.

August 23, 2013 at 4:47 pm

I meant the JOHN posting at 1:12pm

August 23, 2013 at 4:45 pm

John reading 2-year old newspapers....clown

August 23, 2013 at 4:42 pm

yes homes are affordable if you stay in your budget.and don't over spend and make the mortgage payment before .anything like cell phones cable or that over the budget car your driving .point don't live above your means................

bob smith
August 23, 2013 at 4:34 pm

america is awesome! banks rule!

August 23, 2013 at 3:58 pm

Yes, there probably are home foreclosures and very affordable homes, but I would not be surprised if the majority are located in less than desirable areas with bad schools, high crime rate and too long of a commute to where jobs are located which adds up to a bad investment.

August 23, 2013 at 3:03 pm

Bad credit is usually the problem to buying homes

August 23, 2013 at 1:12 pm

Clearly you are all blind. home forclosures are still high and homes VERY affordable in small towns west and south. Yes homes in the 50k range.