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Economy in Brief

Housing Affordability Increases in April as Mortgage Rates Fall
by Tom Moeller  June 12, 2020

• Housing affordability jumps to its highest rate since March 2016.

• Strength in home prices is offset by improvement in income & lower mortgage rates.

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index jumped 5.9% (11.8% y/y) to 171.7 in April, the highest level in roughly four years.

The effective mortgage interest rate declined to 3.37% in April from 3.51% in March, down from a recent peak of 4.99% in December 2018. Median family incomes, which are projected by the National Association of Realtors, rose 7.0% y/y to $84,065, pushing the share of income devoted to mortgage payments down to 14.6%, the lowest level since November 2016. The median price of a single-family home increased 7.3% y/y to $288,700 in April. Principle & interest payments edged slightly higher to $1,020 per month.

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 SURVEYW, WEEKLY, and DAILY.

Housing Affordability Apr Mar Feb Y/Y% 2019 2018 2017
Fixed Rate Housing Affordability Index (100+ = Affordable) 171.7 162.1 169.6 11.8 157.6 147.9 159.1
  Payment as a Percent of Income 14.6 15.4 14.7 16.3 15.9 16.9 15.7
  Principal and Interest Payment ($) 1,020 1,016 984 -4.2 1,044 1,079 967
  Monthly Fixed Mortgage Rate (%)   3.37 3.51 3.53 4.30 4.04 4.72 4.20
  Median Family Income ($) 84,065 79,072 80,117 7.0 78,959 76,401 73,891
  Median Sales Price (Existing Single Family Home, $) 288,700 282,600 272,800 7.3 272,333 259,458 247,508
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