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Economy in Brief

U.S. Home Affordability Enhanced by Lower Home Prices
by Tom Moeller  November 15, 2013

The National Association of Realtors reported that its September Housing Affordability Composite Index recovered to 164.3 from 158.0 during August. The Affordability Index reached a peak of 213.6 in January when average mortgage interest rates were at their low of 3.4%.

The latest improvement in affordability represents a decline in the median sales price to $199,300 from a June peak of $214,600. At the same time, however, the average mortgage rate rose to 4.53%, up 100 basis points. This combination lowered the monthly mortgage payment to $811. 

Median family income inched up during September to $63,962, up 2.2% y/y. As a result, monthly mortgage payments as a percent of income slipped to 15.2% in September. That was up, however, from 11.7% at the start of this year.

The Housing Affordability Index equals 100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. A rising index indicates more buyers can afford to enter the home-buying market. Data on Home Affordability can be found in Haver's REALTOR database. Interest rate data can be found in the WEEKLY and DAILY databases.

Housing Affordability Sep Aug Jul Sep Y/Y 2012 2011 2010
Composite Index 164.3 158.0 160.7 -17.2 197.4 188.0 172.6
  Median Sales Price (Existing Single Fam. Home) $199,300 $209,700 $213,000 11.4% $175,783 $164,933 $174,742
  Monthly Mortgage Rate   4.53% 4.41% 4.13% 3.68% 3.83% 4.67% 4.89%
  Principal and Interest Payment $811 $851 $826 $657 $657 $682 $733
  Median Family Income $63,962 $63,783 $63,723 $62,573 $62,088 $61,455 $60,609
  Payment as a Percent of Income 15.2 15.8 15.6 12.6 12.7 13.3 14.5
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