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Economy in Brief

U.S. Home Affordability Improves M/M
by Tom Moeller  October 12, 2018

The National Association of Realtors reported that its Composite Index of Home Affordability declined 8.3% y/y during August to 141.2. The index was 34.4% below its peak in January 2013. Month-to-month, home affordability rose slightly.

Together, principal & interest payments of $1,119 eased m/m to 17.7% of median income. That percentage compared to a low of 11.6% early in 2013. Higher prices helped reduced affordability during the last year. The median sales price of an existing home strengthened 4.9% y/y to $267,300. This price was lower than during the prior two months as prices typically weaken during the summer. The price decline was accompanied by a higher average mortgage rate of 4.78%, up from a 3.43% low in December 2012. Growth in median family income slowed to 3.0% y/y in August from 3.3% last year, and 4.1% during all of 2016.

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 Aug Jul Jun Aug Y/Y 2017 2016 2015
Composite Index 141.2 138.9 136.1 -8.3% 158.2 168.5 168.0
  Payment as a Percent of Income 17.7 18.0 18.4 16.2 15.8 14.9 14.9
  Principal and Interest Payment $1,119 $1,135 $1,153 12.3% $967 $880 $849
  Median Sales Price (Existing Single Family Home) $267,300 $271,900 $276,500 4.9% $247,508 $233,642s $221,350
  Monthly Mortgage Rate   4.78% 4.75% 4.74% 4.19% 4.20% 3.88% 4.03%
  Median Family Income $75,835 $75,690 $75,312 3.0% $73,409 $71,062 $68,260
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