Global| Feb 12 2021U.S. Housing Affordability Continues to Improve During December
by:Tom Moeller
|in:Economy in Brief
Summary
• Declines in home prices & interest rates boost buying power. • Monthly payments move lower. The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index jumped 2.1% (2.8% y/y) to 171.8 [...]
• Declines in home prices & interest rates boost buying power.
• Monthly payments move lower.
The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index jumped 2.1% (2.8% y/y) to 171.8 during December following a 0.7% gain to 168.2 in November. Despite the increase, affordability remained 6.0% below its April high.
Declines amongst index components were widespread in December. Payments as a percent of income eased to 14.5% from 14.9%. They were below the June 2018 high of 18.1%. Principal & interest payments declined 1.7% (-0.8% y/y) to $1,022, down for the fourth straight month. The effective mortgage interest rate declined to a record low of 2.73% in December (figures date back to 1981). That compared to a late-2018 high of 4.99% and an average 15.38% in 1982. The median sales price eased 0.6% (+13.2% y/y) to $313,700, down from October's record high of $317,800. These declines were accompanied by a 0.4% rise (1.9% y/y) in homebuyers' median family income to $84,290.
The Housing Affordability Index equals 100 when median family income qualifies for an 80% mortgage on a median-priced existing single-family home. A rising index indicates an increasing number of buyers can qualify for a mortgage to purchase the median-priced home. Data on Home Affordability can be found in Haver's REALTOR database. Median sales prices are located in USECON. Higher frequency interest rate data can be found in SURVEYW, WEEKLY, and DAILY.
The Budget and Economic Outlook: 2021 to 2031 from the Congressional Budget Office is available here.
| Housing Affordability | Dec | Nov | Oct | Y/Y% | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|---|---|
| Fixed Rate Mortgage Housing Affordability Index (100+=More Affordable) | 171.8 | 168.2 | 167.0 | 2.8 | 172.0 | 161.1 | 147.9 |
| Payment as a Percent of Income | 14.5 | 14.9 | 15.0 | 14.9 | 14.5 | 15.5 | 17.0 |
| Principal and Interest Payment ($) | 1,022 | 1,040 | 1,056 | -0.8 | 1,028 | 1,044 | 1,079 |
| Monthly Mortgage Rate (%) | 2.73 | 2.82 | 2.88 | 3.78 | 3.17 | 4.04 | 4.72 |
| Median Family Income ($) | 84,290 | 83,977 | 84,672 | 1.9 | 84,843 | 80,704 | 76,401 |
| Median Sales Price (Existing Single-Family Home, $) | 313,700 | 315,600 | 317,800 | 13.2 | 298,708 | 272,333 | 259,458 |
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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