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Economy in Brief

U.S. Housing Affordability Index Rebounds in July; First M/M Rise Since September
by Winnie Tapasanun  September 9, 2022

• Affordability improves in July w/ HAI up 3.1% to 102.2.

• Lower home prices & interest rates improve affordability.

• Median sales price of a home drops 2.4% to a three-month-low $410,600 from June's record high; mortgage payments fall from June's record high.

• Median family income declines for the first time since Sept. following nine straight m/m rises.

The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index rose 3.1% m/m (-30.2% y/y) to 102.2 in July after drops of 3.0% to 99.1 in June and 5.5% to 102.2 in May. The July reading was the first m/m rise since September, indicating affordability was improved slightly for the month following nine straight monthly declines. The affordability level has plunged 43.7% since its January 2021 peak of 181.5.

Affordability was improved in July as the median sales price of a home fell 2.4% (+10.6% y/y) to $410,600, the first m/m fall since January to the lowest level in three months, after a 1.3% increase to a record $420,900 in June. That reduced principal & interest payments to $1,861 per month (50.1% y/y) from June's record $1,933. The effective mortgage interest rate fell to 5.48% in July from 5.60% in June (highest since November 2008); nevertheless, it was up from 2.92% last July and a record-low 2.73% in December 2020.

Median family income fell 0.7% (+4.7% y/y) to $91,304 in July, the first m/m fall since September, after a 1.4% increase to $91,952 in June. It remained 4.6% below the March 2021 high of $95,696. Mortgage payments as a percent of income declined to 24.5% from June's 25.2%; however, these numbers were up from 17.1% last July and a recent low of 13.8% in January 2021.

The Housing Affordability Index equals 100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. This index has been above 100 in each month (except June 2022) since July 1990, reaching its all-time high of 213.3 in January 2013.

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.

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