Wednesday, May 21, 2008

National Association Of Home Builders "Housing Opportunity Index" Shows Anchorage And Fairbanks In The Middle Of The "Affordability" Pack

The National Association of Home Builders (NAHB) released their annual Housing Affordability Index ratings on May 20th, 2008, and they show that of the 223 metropolitan areas in the United States rated, Alaska's two most populated areas are in the middle of the pack. Information from a CNNMoney report as well as from the a press release on the NAHB website. The CNN Money report combines both small market areas and large market areas onto the same list. No Alaska media coverage of this story as of post time.

The Housing Affordability Index (HOI) is defined as the percentage of homes sold in a given area that were affordable to families earning the area's median household income. It is calculated by initializing the median family income for a given area against the median home price for the same area, then determining what percentage of the homes sold could have been purchased by those earning the median income.

Fairbanks was rated the 111th most affordable market in the nation, based on 61.5 percent of homes sold being within the reach of those earning Fairbanks' median income. This is based upon a median family income of $71,300 and a median sale price of $212,000 in the local area.

Anchorage was rated the 122nd most affordable market in the nation, based on 57.5 percent homes sold being within the reach of those earning Anchorage's median income. This is based upon a median family income of $77,700 and a median sale price of $240,000. However, the median sale price given here is lower than that provided by other sources, so it is likely that the southern part of the Matanuska-Susitna Valley, where median home prices are lower, is also included in Anchorage's statistics.

The HOI only focuses on home prices and not on taxes, utilities, or other associated costs. Consequently, the greater affordability of Fairbanks homes could be cancelled out by utilities costs currently three to four times higher than those in Anchorage.

Nationally, homes became more affordable for the third consecutive quarter, with the HOI rising to the highest level since the second quarter of 2004. The national HOI shows that 53.8 percent of all new and existing homes that were sold during the first quarter were affordable to families earning the national median income of $61,500. NAHB President Sandy Dunn, a builder from Point Pleasant, WV, states that three factors combined to substantially increase housing affordability nationwide — mortgage rates returning to near the record low levels of a few years ago, a $2,500 rise in family income nationwide, and lower house prices.

In the nation’s most affordable major housing market of Indianapolis, 90.1 percent of homes sold in the first quarter were affordable to families earning the area’s median household income of $65,100. Also near the top of the list for affordable major metros (population 500,000 or larger) this time around were Youngstown-Warren-Boardman, Ohio-Pa.; Grand Rapids-Wyoming, Mich.; Detroit-Livonia-Dearborn, Mich.; and Harrisburg-Carlisle, Pa., in that order. [Ed. Note: I would strongly suggest reading the Detroitiscrap blog before considering a move to Detroit, however.]

One smaller metro market (fewer than 500,000 people) outranked all others in terms of housing affordability during the first quarter of 2008. This was Kokomo, Ind., where 95.3 percent of all homes sold in the period were affordable to families earning that area’s median household income of $57,400.

Also maintaining its long-held standing on the HOI was Los Angeles-Long Beach-Glendale, Calif., which has now been the nation’s least-affordable major housing market for 14 consecutive quarters. There, 10.5 percent of new and existing homes sold during the first quarter were affordable to those earning the area’s median family income of $59,800. Other major metros at the bottom of the housing affordability chart included New York-White Plains-Wayne, N.Y.-N.J.; San Francisco-San Mateo-Redwood City, Calif.; Miami-Miami Beach- Kendall, Fla.; and Santa Ana-Anaheim-Irvine, Calif., in that order.

Among metro areas smaller than 500,000 people, the five markets at the bottom of the affordability chart were all located in California, starting with Salinas as the least affordable and followed by San Luis Obispo-Paso Robles, Napa, Santa Barbara-Santa Maria-Goleta and Santa Cruz-Watsonville, respectively.

CNNMoney also reported that home prices nationwide dropped eight percent during the past year. They also illustrated how the housing bubble has become seriously deflated in some of the high-end markets. Bubble deflation improved affordability in Santa Ana in Orange County, Calif. Helped by a median price drop to $470,000 from $610,000 a year ago there, 17.4% of homes sold were affordable, up from 4.4% during the first three months of 2007.

In San Diego, home affordability rose to 25.2% from 9.4% as prices dropped to $368,000 from $460,000; in Riverside, Calif. affordability went to 26.9% from 9.7% as prices fell to $288,000 from $380,000; and in Stockton, Calif., it soared to 35.5% from 9.7% as prices cratered to $262,000 from 390,000. These are some serious price drops, although still beyond the reach of most Americans.

The HOI also indicates that the national weighted interest rate on fixed and adjustable-rate mortgages – a key component in calculating the HOI – was 6.02 percent in the first quarter, compared to 6.42 percent in the fourth quarter of 2007, and the lowest since third quarter of 2005.

More detailed tables, in Excel format, can be found at

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