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Economy in Brief

Housing Affordability Worsened in June from May, But Improved from a Year Ago
by Kathleen Stephansen  August 13, 2020

• Falling incomes offset record low mortgage interest rates.

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index declined 3.8% to 163.7 in June (+7.9% y/y) from a 0.9% drop in May (+12.9% y/y). The index had reached a four-year high in April.

Median family income, which is projected by the National Association of Realtors, dropped 0.6% in June (+3.4% y/y), following a steeper 2.5% monthly decline in May (+4.2% y/y). Family income had jumped 6.6% in April (+7% y/y), reflecting the sharp rise in government transfers. A drop in government support programs ensued in May and June, explaining the monthly declines in income during these two months.

The effective mortgage interest rate declined to a new record low of 3.22% in June, from 3.29% in May and down from an average 4% in 2019, while the median sales price rose 4.2% to $298,600.

All in all, these changes pushed up the monthly principal and interest payments to $1036 in June from $1,003 in May, while the payment share of income rose to 15.3% from 14.7%.

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 Jun May Apr Y/Y% 2019 2018 2017
Fixed Rate Housing Affordability Index (100+ = Affordable) 163.7 170.2 171.7 7.9 157.6 147.9 159.1
  Payment as a Percent of Income 15.3 14.7 14.6 16.5 15.9 17.0 15.7
  Principal and Interest Payment ($) 1,036 1,003 1,020 -4.2 1,044 1,079 967
  Monthly Fixed Mortgage Rate (%)   3.22 3.29 3.37 3.84 4.04 4.72 4.20
  Median Family Income ($) 81,424 81,931 84,059 3.4 78,964 76,401 73,891
  Median Sales Price (Existing Single Family Home, $) 298,600 286,600 288,700 3.5 272,333 259,458 247,508
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