Soaring building material costs, high demand and low inventory have added tens of thousands of dollars to the price of a new home and caused housing affordability to fall to its lowest level in nearly a decade during the second quarter of 2021.
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), 56.6 percent of new and existing homes sold between the beginning of April and end of June were affordable to families earning the U.S. median income of $79,900. This is down sharply from the 63.1 percent of homes sold in the first quarter of 2021 and the lowest affordability level since the beginning of the revised series in the first quarter of 2012.
"Runaway construction cost growth, such as ongoing elevated prices for oriented strand board that has skyrocketed by nearly 500 percent since January 2020, continue to put upward pressure on home prices," said NAHB chairman Chuck Fowke. "Policymakers must address supply chain bottlenecks for building materials that are raising costs and harming housing affordability."
"Recent NAHB analysis shows that higher costs for lumber products have added nearly $30,000 to the price of an average new single-family home and raised the rental price of a new apartment unit by more than $90," said NAHB chief economist Robert Dietz. "With the U.S. housing market more than 1 million homes short of what is needed to meet the nation's demand, policymakers need to focus on supply-side solutions that will enable builders to increase housing production and rein in rising home prices."
The HOI shows that the national median home price surged to a record $350,000 in the second quarter, up $30,000 from the first quarter. This is the largest quarterly price hike in the history of this series. Meanwhile, average mortgage rates increased by 13 basis points in the second quarter to 3.09 percent from the rate of 2.96 percent in the first quarter. However, mortgage rates are currently running at 2.8 percent, which has provided some support for housing demand in recent weeks.
Visit nahb.org/hoi for tables, historic data and details.