Coronavirus hurts housing affordability: The 5 most and least affordable metro areas

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By taking money out of Americans’ paychecks and creating a housing shortage, the coronavirus delivered a blow to housing affordability. However, the pandemic has driven mortgage rates to record lows, a trend that has softened the blow to buyers’ budgets.

The National Association of Home Builders (NAHB) estimates that median family income for 2020 will fall to $72,900 from $75,500 in 2019. “You have a sudden stop for the economy, which means for a lot of buyers, their budget available to buy a home has drastically changed,” says Robert Dietz, NAHB’s chief economist. 

As a result of that pay cut, it’s getting harder for Americans to buy homes. Just 58.3 percent of homes sold during the third quarter were affordable to families earning a typical income, down from 59.6 percent in the second quarter, 61.3 percent in the first quarter and 63.2 percent in the fourth quarter of 2019, according to the NAHB/Wells Fargo Housing Opportunity Index.

Three factors drive affordability

The builders’ index looks at three variables — incomes, home prices and mortgage rates. The affordability study shows nationwide home prices have spiked in recent months. The median home price rose to a record $313,000 in the third quarter from $300,000 in the second quarter and $280,000 in the first quarter of 2020.

In a trend that offsets some of the affordability squeeze, average mortgage rates fell to 3.05 percent in the third quarter, down from 3.34 percent in the second quarter and 3.61 percent in the first quarter, according to Bankrate data.

While falling mortgage rates created tailwinds for affordability, there are two major headwinds — layoffs and rising home prices. The U.S. jobless rate jumped to the double digits in the spring. But many people are still employed, and those fortunate folks are driving home prices higher. Bidding wars have broken out in many areas.

“Though low mortgage rates and favorable demographics have helped spur demand, a lack of inventory exacerbated by supply chain issues stemming from the COVID-19 pandemic has contributed to rising home prices,” NAHB Chairman Chuck Fowke said in a statement.

5 most affordable metro areas

Home prices and incomes vary widely, and there are oases of affordability, mainly in the Rust Belt and Midwest. The five most affordable among metro areas with population of 500,000 or more:

Scranton-Wilkes Barre-Hazleton, Pennsylvania: Wages here are below national levels, but so are home prices — the median sale price was just $133,000 in the second quarter of 2020. As a result of rock-bottom prices, fully 89.4 percent of all new and existing homes sold in July, August and September were affordable to families earning the area’s median income of $66,600, NAHB says. The median price jumped from $120,000 in the second quarter and $113,000 in the first quarter.

Lansing, Michigan: As a result of a sharp drop in prices, 89.4 percent of all new and existing homes sold in the third quarter were affordable to families earning the area’s median income of $75,000. The median home price fell to $147,000 in the third quarter from $163,000 in the second quarter.

Pittsburgh: This metro area has a median family income of $77,100 and a median home price of just $158,000. As a result, 88.7 percent of homes were affordable for typical earners.

Harrisburg-Carlisle, Pennsylvania: With a median family income of $79,000 and a median home price of $178,000, fully 87.1 percent of homes were in reach of median-income families.

Albany, New York: This metro area has a median family income of $92,200 and a median home price of just $218,000. As a result, 85.6 percent of homes were affordable for typical earners.

5 least affordable areas

At the opposite end of the affordability spectrum, California dominates. The nation’s least affordable markets:

San Francisco-Redwood City-South San Francisco: Incomes are high here — the median is $129,200. Prices are even higher — the typical home went for $1.41 million in the third quarter. That translates to just 9 percent of homes sold during the summer months falling in the range of affordability for families earning the area’s median income.

Los Angeles-Long-Beach-Glendale: In a market with a median home price of $700,000, LA’s median income of just $71,800 doesn’t go far. As a result, only 9.8 percent of homes were affordable for typical families.

Anaheim-Santa Ana-Irvine: Orange County’s incomes are high: The typical family makes $95,700 this year. But home prices are higher, at a median of $795,000. That means just 12.8 percent of homes are in reach of average families.

San Diego-Carlsbad: San Diego has a median family income of $86,100 and a median home price of $640,000, translating to just 18.5 percent of homes falling in the typical buyer’s budget.

San Jose: Silicon Valley’s median family income is a healthy $131,500, but the typical home sold for $1.13 million. That meant 19.2 percent of homes sold were affordable.

Housing affordability has been an ongoing challenge in California and other areas that have seen strong demand and little new building since the Great Recession.

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