Surging job losses in March stemming from the COVID-19 pandemic contributed to a decline in housing affordability in the first quarter of 2020, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI).

In all, 61.3 percent 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 is down from the 63.2 percent of homes sold in the fourth quarter of 2019 that were affordable to households earning the median income of $75,500.

HOI calculations use median family income estimates from the Department of Housing and Urban Development (HUD). However, HUD’s estimates for 2020 were developed prior to the COVID-19 pandemic. To account for the pandemic’s effects, estimates were adjusted consistent with NAHB’s economic forecast for 2020. As a result, the 2020 median income estimates used in HOI calculations are 7.1 percent lower than the initial 2020 estimates produced by HUD.

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. Meanwhile, average mortgage rates fell by 17 basis points in the first quarter to 3.61 percent from 3.78 percent in the fourth quarter.

Scranton-Wilkes Barre-Hazleton, Pa. was rated the nation’s most affordable major housing market, defined as a metro with a population of at least 500,000. There, 91 percent of all new and existing homes sold in the first quarter were affordable to families earning the area’s median income of $66,600. Meanwhile, Cumberland-Md.-W.Va. was rated the nation’s most affordable smaller market, with 97.1 percent of homes sold in the first quarter being affordable to families earning the median income of $57,500.

San Francisco-Redwood City-South San Francisco, Calif., once again assumed the mantle as the nation’s least affordable major housing market. There, just 8.9 percent of the homes sold during the first quarter were affordable to families earning the area’s median income of $129,200.

All five least affordable small housing markets were also in the Golden State. At the very bottom of the affordability chart was Salinas, where 15.3 percent of all new and existing homes sold were affordable to families earning the area’s median income of $75,800.

Visit nahb.org/hoi for tables, historic data and details.

In the latest Mortgage Bankers Association Weekly Application Survey, the benchmark Market Composite Index increased by 0.1 % from one week earlier on a seasonally adjusted basis.

Even as the 30-year fixed-rate mortgage reached a record low of 3.4% as of May 1, compared to a year ago, purchasing applications declined while refinancing continued to stir, as has been the trend in this era of uncertainty brought on by the coronavirus outbreak.

Nonetheless in an encouraging sign, purchasing activity increased from one week ago, thus marking a three-week climb, which, according to the MBA, indicates a release of pent-up homebuying demand as more states reopen and relax stay-at-home orders. The 30-year mortgage rate decreased by 3 basis points from one week prior.

As the above figure suggests, the Index and the 30-year FRM rate often move in opposite directions. This trend has been particularly apparent since the end of 2019. As has been noted before, the average interest rate determined by Freddie mac’s monthly Primary Mortgage Market Survey also dropped from March by 14 basis points to a record low of 3.31%, as of the April reading.

Of the 10% of American adults considering a home purchase in the first quarter of 2020, about half (49%) have moved beyond just planning and are actively engaged in the process to buy a home. This “active buyers” share was slightly higher than in the first quarters of 2018 and 2019—both 46%, and a possible sign that low interest rates steered a few marginal buyers to become engaged in the buying process.

Across generations, Millennials (54%) and Gen Z (51%) prospective buyers are the most likely to be actively looking for a home, compared to 43% of the older two generations. Across regions, more than half of buyers planning a home purchase in the Northeast (56%) and West (52%) are actively engaged, compared to 45% in the Midwest and South.

The timing of the data collection for this report is highly consequential. The online survey was in the field from March 17 through March 28, the early stage of the COVID-19 crisis in the US. About 12 million people filed for unemployment benefits in the two weeks immediately after data collection closed. For this reason, we assess that responses in this quarter’s report mostly reflect people’s views prior to the full impact of stay-at-home orders and social distancing restrictions imposed by local and state governments.

Results from the latest Housing Trends Report also show that the time active home buyers are spending searching for a home continues to rise. In the first quarter of 2020, 56% of actively engaged buyers reported having spent at least 3 months searching, compared to 53% a year earlier. This marks the fifth consecutive year-over-year gain in the share of active buyers who have spent upwards of 3 months looking for a home to buy.

* The Housing Trends Report (HTR) is a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets. The HTR is produced quarterly to track changes in buyers’ perceptions over time. All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult. Results are not seasonally adjusted due to the short time horizon of the series and therefore only year-over-year comparisons are statistically valid. A description of the poll’s methodology and sample characteristics can be found here. This is the fourth in a series of five posts highlighting results for the first quarter of 2020. See previous posts on plans to buy, housing availability, and housing affordability.

Public education accounts for almost 40% of local government direct expenditures per housing unit, based on data from the Census of Government.  School impact fees on new construction are typically determined in part by assumptions about the number of children in public schools per housing unit. The most recent 2018 American Community Survey (ACS) data show that, on average, there is approximately one public school child for every three housing units in the U.S.

The average across all housing units in the U.S. (including both occupied and vacant ones) is 0.34 per housing unit. That is a little over one public school child for ever three homes. Among all structure types, single-family detached housing has the highest average number per unit (0.39), followed by manufactured housing (0.33), single-family attached (0.31), and multifamily (0.22). Larger multifamily properties have fewer public school children per unit. This number is only 0.14 per unit for multifamily buildings with 20 or more units, compared to 0.25 per unit for buildings with 5-19 units, and 0.30 for 2 – 4 unit buildings (Figure 1).

If vacant units are excluded, the average number of public school children per occupied unit will be slightly higher by definition: 0.39 across all structure types. The averages are 0.44 public school child per occupied unit for single-family detached, 0.34 per occupied unit for single-family attached, 0.42 for manufactured housing and 0.26 for multifamily.

The 2018 ACS data show that owner-occupied units have fewer public school children than renter-occupied units for all structure types. Figure 2 shows that, on average, there is 0.38 public school children per owner-occupied unit and 0.41 per renter-occupied unit.

In general, new homes (built in 2017 or 2018), have slightly fewer children attending public schools than existing homes, built before 2017 (Figure 3). Only 0.32 public school children per new construction, compared to 0.34 per existing home. Among all new construction, single-family detached homes have the largest average number per unit (0.43), followed by manufactured housing (0.34), single-family attached (0.21), and multifamily (0.12).

On average, there are fewer public school children per recent mover household, living in the same unit for less than a year, than per non-mover household: 0.35 per mover household vs. 0.39 per non-mover household. For particular types of structures, however, the opposite is true. The only type of structure with fewer public school children per recent mover households is multifamily: 0.21 per recent mover household compared to 0.28 per non-mover.  Figure 4 also shows there is one child attending public school for every two households who recently moved into single-family detached units, but only one for every five households moving into multifamily units.

The number of public school children in different types of homes, with separate statistics for recent movers and new construction, is available in the NAHB Special Study.

Data released by the Census Bureau’s Housing Vacancies and Homeownership survey (CPS/HVS) show that the minority homeownership rate increased to 49.3 percent in the first quarter of 2020, up 2.2 percentage points from the first quarter of 2019 (Figure 1). This is the highest it has been since the first quarter of 2010 (49.5 percent). The year-over-year gain in the minority homeownership rate is double the gain in the overall U.S. homeownership rate, which rose 1.1 percentage points to 65.3 percent in the first quarter of 2020. These gains precede the economic impact of the coronavirus pandemic, however. Fallout from the virus will continue to negatively impact the housing market in the short-term.

Breaking down the minority homeownership rate shows that the black homeownership rate gained the most in the first quarter, with a 2.9 percentage point increase to 44.7 percent (from 41.8 percent in the first quarter of 2019). This is the highest the black homeownership rate has been since the fourth quarter of 2012.

The homeownership rate of Other households (Asian, Pacific-Islander, Native American, and other race households) posted the second largest gain of 2.1 percentage points to reach 58.4 percent in the first quarter of 2020 (from 56.3 percent in the first quarter of 2019).

The Hispanic homeownership rate also had a sizable gain in the first quarter, rising 1.5 percentage points to 48.9 percent (from 47.4 percent in the first quarter of 2019).

Meanwhile, the white homeownership grew by 0.5 percentage points to 73.7 percent in the first quarter (from 73.2 percent in the first quarter of 2019). The white homeownership rate has not declined year-over-year since the first quarter of 2017 (Figure 2).

Low mortgage rates and a healthy job market in the first two months of the year boosted homeownership rates. The emergence of COVID-19, however, has created uncertainty that will impact the housing market and consequently, homeownership rates in the coming months. NAHB expects the housing market to return to solid footing in the later part of the year.