Affordable prices in much of the U.S. and slight drops in mortgage rates allowed the National Association of Home Builders’ housing opportunity index to increase in the fourth quarter.

The index, which is compiled with the assistance of Wells Fargo, said 63.3 percent of new and existing homes sold from October to December 2015 were affordable to families earning $65,800 — the U.S. median income. That was a 1.1 percent increase in the homes that were considered affordable in the third quarter.

"Affordable home prices, attractive mortgage rates, and pent-up demand are keeping the housing market on a gradual, upward path," said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois. "While this bodes well for housing in 2016, builders continue to face a number of challenges, including excessive and costly regulations and a lack of available lots and skilled labor."

NAHB Chief Economist David Crowe said he expects the affordability index to hold steady.

"The signs point to continuing growth in home sales," Crowe said. "We've seen an improvement in affordability due to favorable home prices and interest rates. Steady employment and economic growth, along with rising consumer confidence and pent-up demand will also help encourage more buyers to enter the marketplace."