Global| Feb 10 2016U.S. Home Affordability Is Reduced by Higher Prices
by:Tom Moeller
|in:Economy in Brief
Summary
The National Association of Realtors reported that the Composite Index of Home Affordability declined 3.4% during December (-5.4% y/y). For all of 2015, affordability eased 1.1% following a 6.3% drop in 2014. During the last ten [...]
The National Association of Realtors reported that the Composite Index of Home Affordability declined 3.4% during December (-5.4% y/y). For all of 2015, affordability eased 1.1% following a 6.3% drop in 2014. During the last ten years, there has been a 62% correlation between the affordability index level and the y/y change in new plus existing single-family home sales.
Mortgage payments as a percent of income rose slightly to 15.5% by the end of last year. A 2.1% rise in home prices during December caused the erosion in home affordability. Full-year home prices showed strength for the fourth straight year, rising 6.9% in 2015. The average mortgage rate nudged up in December to 4.14% though the full-year average of 4.03% was below the 4.30% averaged in 2014.
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.
The Monetary Policy Report from the Federal Reserve Board can be found here.
| Housing Affordability | Dec | Nov | Oct | Dec Y/Y | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|
| Composite Index | 161.7 | 167.4 | 166.7 | -5.4% | 163.9 | 165.8 | 176.9 |
| Median Sales Price (Existing Single Fam. Home) | $226,000 | $221,400 | $220,600 | 8.0% | $221,442 | $207,125 | $195,933 |
| Monthly Mortgage Rate | 4.14% | 4.01% | 4.05% | 4.2% | 4.03% | 4.30% | 4.00% |
| Principal and Interest Payment | $878 | $847 | $848 | 7.7% | $849 | $820 | $750 |
| Median Family Income | $68,163 | $68,074 | $67,865 | 1.9% | $67,507 | $65,910 | $64,030 |
| Payment as a Percent of Income | 15.5 | 14.9 | 15.0 | 14.6 | 15.1 | 14.9 | 14.0 |
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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