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.

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. Some 59.6 percent of homes sold during the first quarter were affordable to families earning a typical income during April, May and June, down from 61.3 percent in the first quarter of 2020 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 rose to a record $300,000 in the second quarter, up from $280,000 in the first quarter of 2020.

Meanwhile, average mortgage rates fell to 3.34 percent in the second quarter from 3.61 percent in the first quarter. Rates have fallen even lower, to 3.22 percent now, 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 has been in the double digits since April, and home prices have surged as bidding wars have broken out in many areas.

“Home prices appreciated robustly during the second quarter due to better-than-expected housing demand in the wake of the pandemic, and because the coronavirus hindered the ability of builders to ramp up production,” Dietz says.

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 top 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 $120,000 in the second quarter of 2020. As a result of rock-bottom prices, fully 89 percent of all new and existing homes sold in the spring quarter were affordable to families earning the area’s median income of $66,600, NAHB says. The median price jumped from $113,000 in the first quarter.

Harrisburg-Carlisle, Pennsylvania: With a median family income of $79,000 and a median home price of $170,000, fully 87.6 percent of homes were in reach of median-income families.

Pittsburgh: This metro area has a median family income of $77,100 and a median home price of just $155,000. As a result, 87.3 percent of homes were affordable for typical earners.

St. Louis: The average median income of $77,000 meant the median-priced home of $165,000 fell within the budgets of 86.9 percent of buyers.

Wilmington, Delaware: This region’s above-average median income of $84,200 made the median-priced home of $228,000 affordable to 86.8 percent of buyers.

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 $1.4 million in the second quarter. That translates to just 8.5 percent of homes sold during the second quarter 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 $640,000, LA’s median income of just $70,600 doesn’t go far. As a result, only 10.8 percent of homes were affordable for typical families.

Anaheim-Santa Ana-Irvine: Orange County’s incomes are high: The typical family makes $94,600 this year. But home prices are higher, at a median of $760,000. That means just 13.4 percent of homes are in reach for average families.

San Jose: Sillicon Valley’s median family income is a healthy $131,500, but the typical home sold for $1.1 million. That meant 16.2 percent of homes sold were affordable.

San Diego-Carlsbad: San Diego has a median family income of $86,100 and a median home price of $594,000, translating to just 20.1 percent of homes falling in the typical buyer’s budget.

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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