A nine-point surge in the National Association of Realtors’ Housing Affordability Index to 110.6 signals a statistical improvement for homebuyers, yet the reality on the ground remains a complex patchwork of relief and strain.
The National Association of Realtors’ Housing Affordability Index surged nine points to 110.6 in April, advancing from 101.4 a year prior, fueled by moderating mortgage rates and steady income growth. The reading, which indicates a median-income family has more than enough income to qualify for a median-priced home, suggests a tangible easing in the housing market, even as a separate analysis shows significant overpricing in several regional markets.
"Despite modest income gains in recent years, many middle-income buyers still struggle to find homes within their budget, particularly at the entry level where inventory remains tight and competition stays fierce,” said Hannah Jones, senior economist at Realtor.com, in a May report.
The affordability improvement was driven by the average 30-year fixed mortgage rate easing to 6.33 percent in April from 6.73 percent a year ago, according to data from 247wallst.com. Simultaneously, per capita disposable personal income climbed to $68,617 from $66,095. However, the gains are fragile, with consumer sentiment remaining at a recessionary level of 49.8 and the personal savings rate falling to 4.0 percent from 5.2 percent a year earlier.
The data reveals a bifurcated market where national averages mask stark regional differences. While 19 of the 100 largest metropolitan areas now show better alignment between listing prices and incomes than before the pandemic, other regions are seeing prices detach from local fundamentals. This divergence creates opportunities for some buyers while locking others out, complicating the national recovery picture.
Tale of Two Markets: Improvement and Misalignment
In cities like Denver and Honolulu, an increase in new inventory has helped cool home prices, which, combined with steady local wage growth, has meaningfully improved affordability, according to the NAR and Realtor.com report. New Orleans and Houston have also seen greater inventory keep a lid on prices, making them more accessible.
This relief stands in contrast to the broader national challenge. The report highlights a significant "inventory mismatch" for families earning around $75,000. While these households can typically afford a home up to $261,140, homes in that price range make up just 23 percent of listings nationwide. The market is still more misaligned than before the pandemic, even with recent improvements.
The Overpricing Paradox
While some markets cool, others are overheating. A recent analysis by financial site MoneyLion, which compared median list prices to average home values, identified dozens of "overpriced" metro areas. The report underscores the idea that a rising national affordability tide is not lifting all boats.
For example, in Kingsport, Tennessee, the median list price of $315,248 is over 29 percent higher than the area's average home value of $243,902, making it the 16th most overpriced market in the nation. The list also featured numerous cities in Florida, Texas, and Alabama, indicating that pockets of extreme price dislocation are a widespread issue. This paradox—where national affordability metrics improve while specific markets become more unattainable—presents a significant hurdle for prospective buyers.
The conflicting data suggests the national housing market is not undergoing a uniform recovery. While lower mortgage spreads have provided some relief, sticky inflation and low consumer confidence remain significant headwinds. For prospective buyers, the path to homeownership is increasingly dependent on local market dynamics rather than national trends, with affordability gains in some cities being offset by persistent overvaluation elsewhere.
This article is for informational purposes only and does not constitute investment advice.
