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Economy in Brief

U.S. Home Affordability Improves As Prices Fall
by Tom Moeller  November 15, 2019

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index rose 2.8% to 164.3 during September (11.5% y/y), the fourth consecutive month of increase. Despite the rise, affordability remained roughly one-quarter below the peak level in January 2013.

The September improvement in affordability occurred as principal & interest payments fell m/m to 15.2% of median income, the lowest percentage since January 2018. The percentage remained below its 18.2% peak in June of that year. The median sales price of an existing home eased 2.4% (+6.1% y/y) to $275,100. Payments also were pulled lower as the average mortgage interest rate in September dipped to 3.65%, remaining sharply below the high of 4.99% at the end of last year. Monthly principal & interest payments fell slightly m/m to $1,007 per month (-7.2% y/y). The y/y growth in median family income of 3.5% has been fairly steady 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 July Sep Y/Y 2018 2017 2016
Fixed Rate Housing Affordability Index 164.3 159.8 155.3 11.5% 147.8 159.1 167.7
  Payment as a Percent of Income 15.2 15.6 16.1 17.0 17.0 15.7 14.9
  Principal and Interest Payment $1,007 $1,033 $1,060 -7.2% $1,079 $967 $880
  Median Sales Price (Existing Single Family Home) $275,100 $281,900 $283,600 6.1% $259,458 $247,508 $233,642
  Monthly Fixed Mortgage Rate   3.65% 3.66% 3.82% 4.77% 4.72% 4.20% 3.88%
  Median Family Income $79,422 $79,218 $79,006 3.5% $76,322 $73,891 $71,062
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