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Economy in Brief

U.S. Housing Affordability Increases as Mortgage Rates Decline
by Tom Moeller  March 13, 2020

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index improved 4.1% m/m (9.2% y/y) to 168.4 in January following a 1.2% decline during December. It was the highest level of affordability since November 2016, but remained below the all-time high of 213.3 reached in January 2013.

In January, the effective mortgage interest rate declined ten basis points to 3.68% and remained below the 4.99% recorded in November of 2018. Monthly principal and interest payments fell to $987 from $1,030 in December. They declined to 14.8% of income, the lowest level since November 2016. The median sales price of a home increased 6.9% y/y to $268,600. Median family income rose 2.7% y/y to $79,796.

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 an increasing number of buyers can qualify for a mortgage to purchase the median-priced home. 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 Jan Dec Nov Jan Y/Y 2019 2018 2017
Fixed Rate Housing Affordability Index 168.4 161.7 163.7 9.2% 157.4 147.8 159.1
  Payment as a Percent of Income 14.8 15.5 15.3 16.2 15.9 16.9 15.7
  Principal and Interest Payment $987 $1,030 $1,016 -6.0% $1.044 $1,079 $967
  Monthly Fixed Mortgage Rate (%)   3.68 3.78 3.75 4.76 4.04 4.72 4.20
  Median Family Income $79,796 $79,931 $79,839 2.7% 3.3% 3.4% 4.0%
  Median Sales Price (Existing Single Family Home) $268,600 $277,000 $274,100 6.9% 5.0% 4.8% 5.9%
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