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Economy in Brief

U.S. Home Affordability Falls Sharply to 2008 Low
by Tom Moeller  August 18, 2017

The National Association of Realtors reported that the Composite Index of Home Affordability declined 7.3% y/y during June to 144.5, the lowest level since September 2008. The index was 32.6% below its peak in January 2013. During the last ten years, there has been a 58% correlation between the affordability index level and the y/y change in existing single-family home sales.

Higher prices have reduced affordability. The median sales price of an existing home strengthened 6.6% y/y to a record high of $266,200. The price rise was accompanied by a higher average mortgage rate of 4.14%, up from 3.43% in December 2012. Together, principal & interest payments rose to $1,034 or 17.3% of median income, the highest percentage since September 2008. That percentage compared to a low of 11.7% early in 2013. Growth in median family income slowed to 2.4% y/y from 3.6% during all of 2015.

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 Jun May April Jun Y/Y 2016 2015 2014
Composite Index 144.5 153.3 156.0 -7.3% 164.8 165.7 165.8
  Median Sales Price (Existing Single Family Home) $266,200 $254,300 $246,300 6.6% $235,500 $223,900 $208,900
  Monthly Mortgage Rate   4.14% 4.01% 4.11% 3.84% 3.88% 4.03% 4.31%
  Principal and Interest Payment $1,034 $972 $953 10.5% $886 $858 $828
  Median Family Income $71,716 $71,513 $71,357 2.4% $70,068 $68,260 $65,910
  Payment as a Percent of Income 17.3 16.3 16.0 16.0 15.2 15.1 15.1
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