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Economy in Brief

U.S. Housing Affordability Continues to Improve During December
by Tom Moeller  February 12, 2021

• Declines in home prices & interest rates boost buying power.

• Monthly payments move lower.

The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index jumped 2.1% (2.8% y/y) to 171.8 during December following a 0.7% gain to 168.2 in November. Despite the increase, affordability remained 6.0% below its April high.

Declines amongst index components were widespread in December. Payments as a percent of income eased to 14.5% from 14.9%. They were below the June 2018 high of 18.1%. Principal & interest payments declined 1.7% (-0.8% y/y) to $1,022, down for the fourth straight month. The effective mortgage interest rate declined to a record low of 2.73% in December (figures date back to 1981). That compared to a late-2018 high of 4.99% and an average 15.38% in 1982. The median sales price eased 0.6% (+13.2% y/y) to $313,700, down from October's record high of $317,800. These declines were accompanied by a 0.4% rise (1.9% y/y) in homebuyers' median family income to $84,290.

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.

The Budget and Economic Outlook: 2021 to 2031 from the Congressional Budget Office is available here.

Housing Affordability Dec Nov Oct Y/Y% 2020 2019 2018
Fixed Rate Mortgage Housing Affordability Index (100+=More Affordable) 171.8 168.2 167.0 2.8 172.0 161.1 147.9
  Payment as a Percent of Income 14.5 14.9 15.0 14.9 14.5 15.5 17.0
  Principal and Interest Payment ($) 1,022 1,040 1,056 -0.8 1,028 1,044 1,079
  Monthly Mortgage Rate (%)   2.73 2.82 2.88 3.78 3.17 4.04 4.72
  Median Family Income ($) 84,290 83,977 84,672 1.9 84,843 80,704 76,401
  Median Sales Price (Existing Single-Family Home, $) 313,700 315,600 317,800 13.2 298,708 272,333 259,458
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