• Housing affordability increased in February to its highest rate since late 2016.

• Lower mortgage rates and rising incomes offset higher home prices.

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index gained 0.8% (7.9% y/y) to 170.0 in February, its highest level since November 2016.

In February, the effective mortgage interest rate declined 15 basis points to 3.53%. Monthly principal and interest payments decreased to $982 from $986 in January. With incomes continuing to rise the share of income devoted to mortgage payments edged down 14.7%, the lowest level since September 2016. The median single family home sales price, which was already reported last month, increased 8.1% y/y to $272,400. Median family incomes, which are projected by the National Association of Realtors, rose 2.6% y/y to $80,117.

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. Median sales prices are located in USECON. Higher frequency interest rate data can be found in SURVEYSW, WEEKLY, and DAILY.