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Economy in Brief

U.S. Housing Affordability Improves During August
by Tom Moeller  October 14, 2022

• Home prices & mortgage rates ease.

• Mortgage payment as percent of income falls.

• Index remains down sharply y/y.

The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index rose 4.8% (-28.3% y/y) to 104.4 in August after a 5.4% July increase. These gains followed nine consecutive monthly declines. Despite the latest increase, the level of affordability remained down 40.5% from its January 2021 peak.

Affordability improved In August as the median home price fell 2.3% (+7.6% y/y) to $396,300. The price peaked at a record $420,900 in June. Also helping affordability, the average mortgage rate eased to 5.29% from 5.48%, though that remained up from the 2.73% low in December 2020. These declines reduced principal & interest payments to $1,759 per month (+43.7% y/y) from June's record $1,933. It remained up from $984 in February 2020.

Also helping to raise affordability, the median family income rose 0.3% (3.1% y/y) to $88,173 in August after a 0.2% July rise. It remained 0.7% below the March 2021 high of $88,827. Mortgage payments as a percent of income declined to 23.9% from a high of 26.5% in June. This figure remained up from a 13.9% low in April 2020.

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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