• Lower mortgage interest rates combine with higher income combine to raise affordability.

• Housing affordability improvement follows four straight monthly declines.

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index edged 0.4% higher (-3.1% y/y) to 159.6 in September. Despite the gain, affordability was 7.0% below its April high.

The effective mortgage interest rate declined to a record low of 2.95% in September (figures date back to 1981). Median family income improved 0.3% (2.3% y/y) following a 1.5% August decline. The median sales price, which was reported last month, increased 0.4% (15.2% y/y) to a record high of $316,200, following three straight months of strong gains. Combined, monthly principal and interest payments eased 0.2% (+5.6% y/y) to $1,060, leaving the payment share of income at 15.7%. That share has increased from 14.6% in April.

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.