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Economy in Brief

U.S. Home Affordability Improves as Mortgage Rates Decline
by Tom Moeller  August 7, 2019

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index improved 1.3% to 151.9 during June (10.3% y/y) after falling 1.6% in May. Despite the increase, affordability remained 28.8% below the peak level during January 2013.

The affordability increase occurred in June as principal & interest payments eased m/m to 16.5% of median income from 16.7% in May. The percentage remained below its 18.2% peak in June 2018, but above the low of 11.6% in January 2013. Payments were pulled lower as the average mortgage interest rate declined to 3.84% in June from 4.11% in May and was sharply below December's high of 4.99%. Monthly principal & interest payments fell slightly to $1,082 per month. The median sales price of an existing home rose 4.5% y/y to $288,900. Growth in median family income picked up to 3.5% y/y in June from 3.4% during all of last 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 Jun May Apr Jun Y/Y 2018 2017 2016
Fixed Rate Housing Affordability Index 151.9 150.0 152.5 10.3% 147.8 159.1 167.7
  Payment as a Percent of Income 16.5 16.7 16.4 18.2 17.0 15.7 14.9
  Principal and Interest Payment $1,082 $1,087 $1,065 -6.2% $1,079 $967 $880
  Median Sales Price (Existing Single Family Home) $288,900 $280,900 $269,100 4.5% $259,458 $247,508 $233,642
  Monthly Fixed Mortgage Rate   3.84% 4.11% 4.30% 4.74% 4.72% 4.20% 3.88%
  Median Family Income $78,916 $78,238 $77,944 3.5% $76,396 $73,891 $71,062
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