Global| Oct 11 2019U.S. Home Affordability Continues to Rise With Lower Mortgage Rates
by:Tom Moeller
|in:Economy in Brief
Summary
The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index increased 3.3% to 160.4 during August (12.6% y/y), the third consecutive month of increase. Despite the rise, affordability [...]
The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index increased 3.3% to 160.4 during August (12.6% y/y), the third consecutive month of increase. Despite the rise, affordability remained one-quarter below the peak level during January 2013.
The August improvement in affordability occurred as principal & interest payments fell m/m to 15.6% of median income, the lowest percentage since February 2018. The percentage remained below its 18.2% peak in June of that year. It nevertheless was above the low of 11.6% in January 2013. Payments were pulled lower as the average mortgage interest rate declined to 3.66% in August from 3.82% in July and was sharply below the high of 4.99% at the end of last year. Monthly principal & interest payments fell slightly m/m to $1,029 per month (-8.4% y/y). The median sales price of an existing home rose 4.7% y/y to $280,700. The y/y growth in median family income of 3.2% has been fairly steady this year.
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 more buyers can afford to enter the home-buying market. Data on Home Affordability can be found in Haver's REALTOR database. Interest rate data can be found in the WEEKLY and DAILY databases.
| Housing Affordability | Aug | July | June | Aug Y/Y | 2018 | 2017 | 2016 |
|---|---|---|---|---|---|---|---|
| Fixed Rate Housing Affordability Index | 160.4 | 155.3 | 151.9 | 12.6% | 147.8 | 159.1 | 167.7 |
| Payment as a Percent of Income | 15.6 | 16.1 | 16.5 | 17.6 | 17.0 | 15.7 | 14.9 |
| Principal and Interest Payment | $1,029 | $1,060 | $1,081 | -8.4% | $1,079 | $967 | $880 |
| Median Sales Price (Existing Single Family Home) | $280,700 | $283,600 | $288,500 | 4.7% | $259,458 | $247,508 | $233,642 |
| Monthly Fixed Mortgage Rate | 3.66% | 3.82% | 3.84% | 4.78% | 4.72% | 4.20% | 3.88% |
| Median Family Income | $79,218 | $79,006 | $78,793 | 3.2% | $76,322 | $73,891 | $71,062 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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