WASHINGTON, DC — The nation’s home builders are warning of “current deteriorating conditions,” as a sharp jump in mortgage rates coupled with ongoing supply chain disruptions, labor shortages and high inflation continue to drive up housing costs, the National Association of Home Builders said.
According to the Washington, DC-based NAHB, 56.9% of new and existing homes sold between the beginning of January and the end of March were affordable to families earning the U.S. median income of $90,000. While this is up from the 54.2% of homes sold in the fourth quarter of 2021, current market indicators point to worsening affordability conditions, the NAHB said.
“The first quarter reading is a backward gauge, as surging interest rates, ongoing building material supply chain constraints and labor shortages continue to raise construction costs and put upward pressure on home prices,” said NAHB Chairman Jerry Konter, adding that every quarter-point hike in mortgage rates means that 1.3 million households are priced out of the market for a nationwide median priced home.
With the Federal Reserve moving aggressively to raise short-term interest rates and reduce its holding of mortgage-backed securities to combat inflation that’s running at a 40-year high, mortgage rates are expected to rise even further in the months ahead, Konter observed.
“Looking at current market conditions, affordability woes continue to mount as rising interest rates and home building material costs that are up 20% year-over-year are causing housing costs to rise much faster than wages,” said NAHB Chief Economist Robert Dietz. “The best way to ease growing affordability challenges is for policymakers to address ongoing supply chain disruptions that will allow builders to construct more affordable homes.”