Global| Jul 10 2015U.S. Home Affordability Is Lessened By Higher Prices
by:Tom Moeller
|in:Economy in Brief
Summary
The National Association of Realtors Composite Index of Home Affordability declined 3.7% during May to 159.7 (-0.9% y/y), down for the fourth consecutive month. The decline was driven by a 4.7% rise in home prices which have increased [...]
The National Association of Realtors Composite Index of Home Affordability declined 3.7% during May to 159.7 (-0.9% y/y), down for the fourth consecutive month. The decline was driven by a 4.7% rise in home prices which have increased 8.6% during the last twelve months. During the last ten years there has been a 69% correlation between the affordability index level and new plus existing single-family home sales.
The rise in home prices offset a dip in mortgage interest rates to 3.9%, the lowest level since June 2013. As a result, principal plus interest payments amounted to $869 per month, up 3.1% y/y. This increase outpaced the 2.1% y/y rise in medium family incomes. Mortgage payments as a percent of income rose to the highest level (15.7%) in nine months.
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.
Recent Developments and the Outlook for the Economy is the title of today's speech by Fed Chair Janet L. Yellen and it can be found here.
| Housing Affordability | May | Apr | Mar | May Y/Y | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|
| Composite Index | 159.7 | 165.9 | 171.6 | -0.9% | 166.3 | 179.6 | 198.8 |
| Median Sales Price (Existing Single Fam. Home) | $230,300 | $220,000 | $212,100 | 8.6% | $207,125 | $195,933 | $175,783 |
| Monthly Mortgage Rate | 3.90% | 3.95% | 3.95% | 4.34% | 4.30% | 4.00% | 3.83% |
| Principal and Interest Payment | $869 | $835 | $805 | 3.1% | $820 | $750 | $657 |
| Median Family Income | 66,608 | $66,483 | $66,311 | 2.1% | $65,321 | $64,030 | $62,531 |
| Payment as a Percent of Income | 15.7 | 15.1 | 14.6 | 15.5 | 15.1 | 14.0 | 12.6 |
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.
