It was refreshing to see optimism in a statement issued by the National Association of Home Builders last week. Nationwide housing affordability during the fourth quarter of 2010 rose to its highest level in the 20 years since it has been measured, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
The HOI indicated that 73.9 percent of all new and existing homes sold in the fourth quarter of 2010 were affordable to families earning the national median income of $64,400. The record-setting index for the fourth quarter surpassed the previous high of 72.5 percent set during the first quarter of 2009 and marked the eighth consecutive quarter that the index has been above 70 percent. Until 2009, the HOI rarely topped 65 percent and never reached 70 percent. However, while this is good news for consumers, both home buyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.
Indianapolis-Carmel, Ind., was the most affordable major housing market in the country for the second consecutive quarter, after relinquishing for a quarter the top spot it has held for five years. In Indianapolis, 93.5 percent of all homes sold were affordable to households earning the area's median family income of $68,700.
Also ranking near the top of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Syracuse, N.Y; Warren-Troy-Farmington Hills, Mich.; and Detroit-Livonia-Dearborn, Mich.
Among smaller housing markets, the most affordable was Elkhart-Goshen, Ind., where 97.0 percent of homes sold during the fourth quarter of 2010 were affordable to families earning a median income of $58,600. Other smaller housing markets near the top of the index included Lansing-East Lansing, Mich.; Kokomo, Ind.; Mansfield, Ohio; and Bay City, Mich.,.
New York-White Plains-Wayne, N.Y.-N.J., again led the nation as the least affordable major housing market during the fourth quarter of 2010. In New York, more than a fourth - 25.5 percent - of all homes sold during the quarter were affordable to those earning the area's median income of $65,600. This was the 11th consecutive quarter that the New York metropolitan division has held this position.
The other major metro areas near the bottom of the affordability index included San Francisco-San Mateo-Redwood City, Calif.; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif., respectively.
Santa Cruz-Watsonville, Calif. was the least affordable of the smaller metro housing markets in the country during the fourth quarter. In Santa Cruz, 45.0 percent of the homes were affordable to families earning the median income of $84,200. Other small metro areas ranking near the bottom included Ocean City, N.J; San Luis Obispo-Paso Robles, Calif.; Laredo, Texas; and Santa Barbara-Santa Maria-Goleta, Calif.
Perhaps if you are selling a home in the more affordable areas, this is not the best of news. However, home ownership is a great thing, and if low prices open the door to new buyers, the glut of homes will eventually shrink and more families will be able to reach their goal, whether it be move-in or move-up.
We just have to remain optimistic that affordable borrowing power will remain!