The COVID-19 pandemic has caused economic hardship across all sectors. Job losses in March, for example, contributed to a decline in U.S. median income and housing affordability according to the NAHB (National Assn. of Home Builders)/Wells Fargo HOI (Housing Opportunity Index).
The Index shows only 61.3% of new and existing homes sold between the beginning of January and end of March were affordable to families earning an adjusted U.S. median income of $72,900. This income level is down from $75,500 in the fourth quarter of 2019 when 63.2% of homes sold were considered affordable.
The 2020 national median income estimates used in the HOI calculations ($72,900) are 7.1% lower than the initial national 2020 estimates ($78,500) from HUD. The affordability decline is tied to the coronavirus outbreak as job losses surged and median income fell due to reduced economic activity.
The HOI shows that the national median home price held steady, edging up from $279,000 in the fourth quarter of 2019 to $280,000 in the first quarter. The median home price was $280,000 in both the second and third quarter of 2019. Meanwhile, average mortgage rates fell by 17 basis points in the first quarter to 3.61% from 3.78% in the fourth quarter.
Housing demand started the year strong, interest rates are expected to stay at low levels for the foreseeable future, and home prices have held stable over the past four quarters. As virus mitigation efforts show signs of success, workers will return to their jobs, and housing will help lead the economic recovery.
As an example of how developers are dealing with the situation, Taylor Morrison Home Corp., Scottsdale, Ariz., closed the first quarter with sales orders of 3,466, which was up approximately 33% from the prior year quarter. This represented a sales pace per community for the quarter of 3.1, which was also up nearly 35% from the sales pace of 2.3 in the first quarter of 2019.
In response to the crisis, Taylor Morrison added new features to its website enabling customers to schedule virtual and private in-person appointments. And while customers have this ability, virtual appointments make up more than 85% of the appointments to-date, Taylor Morrison notes that more than 20% of their April net sales were completely virtual.
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