According to a recent report by the National Association of the Home Builders (NAHB), housing affordability declined across the U.S. in the third quarter of 2013 as home prices soared and interest rates jumped.

The report claims that housing affordability fell 4.8 percent on a quarter on quarter basis for median income families earning $64,400 a year. Apparently, this is the largest decline since the second quarter of 2004.

While Indianapolis and Syracuse topped the most affordable markets list, Santa Cruz, Napa and Long Beach were some of the areas that were at the bottom of the list. It was observed that California had the lowest affordability rate.

Experts attribute the fall in affordability to rising home prices and interest rates that followed the soaring costs. According to Bloomberg, single-family home prices went up in 88 percent of the states in America as inventory still remains low and foreclosures limited.

"Housing affordability is being negatively affected by a 'perfect storm' scenario. With markets across the country recovering, home values are strengthening at the same time that the cost of building homes is rising due to tightened supplies of building materials, developable lots and labor," Rick Judson, Chairman of NAHB said in the report.

With high demand and limited supply, prices have risen considerably. This has fuelled a significant rise in the mortgage interest rates as well. The average 30-year mortgage rate jumped to 4.35 percent from 4.16 percent the previous week. This hike is the highest since September 15. The 15-year mortgage rates also went up to 3.35 percent from 3.27 percent, reports USA Today.

"The decline in affordability is the result of higher mortgage rates and the more than year-long steady increase in home prices," David Crowe, Chief Economist of NAHB explained.

Crowe went on to add that though the affordability index has come down, about 65 percent of the median income earning families can still afford to buy a home.

However, these factors are good news for the economy. The steady rise in prices and interest rates came on the Fed's bond-buying program. Apparently, they will keep the scheme alive until early 2014. But the market still has a long way to go.

Commenting on the improving market, Warren Buffet, famous investor, CEO of Berkshire Hathaway said:

"It's coming back. Pricing is better in almost all markets by a reasonable percentage from a few years ago. Housing starts are up somewhat. They still are not where I would regard as an equilibrium point, where they match household formation."