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Housing affordability ended 2023 near its lowest level in more than a decade, according to the NAHB/Wells Fargo Housing Opportunity Index. According to the index, 37.7% of new and existing homes sold in the fourth quarter were affordable to families earning the median income of $96,300. Unsurprisingly, the least affordable large and small metros in the fourth quarter were all located in California.

Affordability conditions should show some gradual improvement this year, as mortgage rates peaked in the fourth quarter of 2023 and are now well below 7%,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “But even as lower interest rates track with our latest builder surveys that indicate an upturn in builder confidence in the single-family market, affordability conditions will remain challenging as builders contend with a high-cost regulatory environment and a chronic shortage of workers and buildable lots.”

“Even as overall inflation continues to moderate, shelter costs continue to put upward pressure on inflation, accounting for more than half the inflation gains in the latest Consumer Price Index,” said NAHB Chief Economist Robert Dietz. “The best way to tame shelter inflation and address America’s housing affordability challenges is to enact policies that reduce regulatory costs to help builders increase the supply of housing.”

Lansing-East Lansing, Michigan, was the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. There, 79.3% of all new and existing homes sold in the fourth quarter were affordable to families earning the area’s median income of $97,800.

Top five affordable major housing markets:

  1. Lansing-East Lansing, Michigan
  2. Harrisburg-Carlisle, Pennsylvania
  3. Indianapolis-Carmel-Anderson, Indiana
  4. Dayton-Kettering, Ohio
  5. Akron, Ohio

Meanwhile, Bay City, Michigan, was rated the nation’s most affordable small market, with 88.3% of homes sold in the fourth quarter being affordable to families earning the median income of $82,300.

Top five affordable small housing markets:

  1. Bay City, Michigan
  2. Elmira, New York
  3. Davenport-Moline-Rock Island, Iowa-Illinois
  4. Cumberland, Maryland-West Virginia
  5. Springfield, Ohio
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