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Economy in Brief

U.S. Housing Affordability Declines Sharply in January
by Tom Moeller  March 11, 2022

• Higher mortgage rates drive affordability lower.

• Principal & interest payments surge.

• Payment as a percent of income moves up roughly four percentage points y/y.

Affordable homes were increasingly difficult find in January, even though incomes rose. The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index fell 2.8% in January to 143.0 from 147.1 in December. Affordability has fallen 22.2% since its recent high of 183.8 in January 2021, which was revised from 187.8. The Housing Affordability Index equals 100 when median family income equals the amount required for an 80% mortgage on a median-priced existing single-family home.

In January, a 1.2% decline (+15.9% y/y) in the median sales price of a home to $357,100 was accompanied by a rise in mortgage rates to 3.51% in January, up from 2.79% twelve months earlier. As a result, the monthly mortgage payment rose 3.4% to a record $1,284 (27.0% y/y) from $1,242 in December.

Median family income in January rose 0.5% (-1.2% y/y) to $88,114 from $87,683 in December. Consequently, the standard mortgage payment as a percent of income rose to 17.5%, the highest level since August 2018. These figures are up from a recent low of 13.6% in January 2021.

Data on Housing Affordability can be found in Haver's REALTOR database. Median home sale prices are also located in USECON. Higher frequency interest rate data can be found in SURVEYW, WEEKLY, and DAILY.

Housing Affordability Jan Dec Nov Y/Y % 2021 2020 2019
Fixed Rate Mortgage Housing Affordability Index (100+=More Affordable) 143.0 147.1 147.4 -22.2 155.8 172.3 161.3
  Payment as a Percent of Income 17.5 17.0 17.0 13.6 16.2 14.5 15.5
  Principal and Interest Payment ($) 1,284 1,242 1,237 27.0 1,182 1,028 1,044
  Monthly Mortgage Rate (%)   3.51 3.15 3.12 2.79 3.01 3.17 4.04
  Median Family Income ($) 88,114 87,683 87,501 -1.2 87,965 84,969 80,808
  Median Sales Price (Existing Single-Family Home, $) 357,100 361,300 361,300 15.9 349,917 298,708 272,333
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