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Economy in Brief

U.S. Home Affordability Declines With Higher Prices
by Tom Moeller  July 12, 2019

The National Association of Realtors reported that its Mortgage Fixed Rate Index of Home Affordability declined 1.4% during May (+5.6% y/y). Affordability stood 29.5% below the peak level during January 2013. The fixed rate mortgage index replaces the composite index which was discontinued.

Together, principal & interest payments of $1,084 rose m/m to 16.6% of median income, but the percentage was down from 17.6% twelve months earlier. This percentage compares to a high of 18.2% last June, and was above the low of 11.6% early in 2013. The median sales price of an existing home rose 4.6% y/y to $280,200. The average mortgage rate declined to 4.11% in May, down from December's high of 4.99%. A 4.6% rise in prices held back the affordability increase during the past year. Growth in median family income slowed to 2.9% y/y in May from 3.4% during all of last year and roughly 4.0% in the prior two years.

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 May Apr Mar May Y/Y 2018 2017 2016
Fixed Mortgage Rate Index 150.4 152.5 152.6 5.6% 147.8 159.1 167.7
  Payment as a Percent of Income 16.6 16.4 16.4 17.6 17.0 15.7 14.9
  Principal and Interest Payment $1,084 $1,065 $1,061 -2.5% $1,079 $967 $880
  Median Sales Price (Existing Single Family Home) $280,200 $269,100 $261,500 4.6% $259,458 $247,508 $233,642
  Monthly Fixed Mortgage Rate   4.11% 4.30% 4.51% 4.71% 4.72% 4.20% 3.88%
  Median Family Income $78,238 $77,944 $77,711 2.9% $76,396 $73,891 $71,062
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