Global| Nov 13 2020U.S. Housing Affordability Improves in September as Interest Rates Decline
by:Tom Moeller
|in:Economy in Brief
Summary
• Lower mortgage interest rates combine with higher income combine to raise affordability. • Housing affordability improvement follows four straight monthly declines. The National Association of Realtors reported that its Fixed Rate [...]
• Lower mortgage interest rates combine with higher income combine to raise affordability.
• Housing affordability improvement follows four straight monthly declines.
The National Association of Realtors reported that its Fixed Rate Mortgage Housing Affordability Index edged 0.4% higher (-3.1% y/y) to 159.6 in September. Despite the gain, affordability was 7.0% below its April high.
The effective mortgage interest rate declined to a record low of 2.95% in September (figures date back to 1981). Median family income improved 0.3% (2.3% y/y) following a 1.5% August decline. The median sales price, which was reported last month, increased 0.4% (15.2% y/y) to a record high of $316,200, following three straight months of strong gains. Combined, monthly principal and interest payments eased 0.2% (+5.6% y/y) to $1,060, leaving the payment share of income at 15.7%. That share has increased from 14.6% in April.
The Housing Affordability Index equals 100 when median family income qualifies for an 80% mortgage on a median-priced existing single-family home. A rising index indicates an increasing number of buyers can qualify for a mortgage to purchase the median-priced home. Data on Home Affordability can be found in Haver's REALTOR database. Median sales prices are located in USECON. Higher frequency interest rate data can be found in SURVEYW, WEEKLY, and DAILY.
| Housing Affordability | Sep | Aug | Jul | Y/Y% | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| Fixed Rate Mortgage Housing Affordability Index (100+=More Affordable) | 159.6 | 158.9 | 162.3 | -3.1 | 157.6 | 147.9 | 159.1 |
| Payment as a Percent of Income | 15.7 | 15.7 | 15.4 | 15.2 | 15.9 | 17.0 | 15.7 |
| Principal and Interest Payment ($) | 1,060 | 1,062 | 1,055 | 5.6 | 1,044 | 1,079 | 967 |
| Monthly Mortgage Rate (%) | 2.95 | 3.00 | 3.08 | 3.65 | 4.04 | 4.72 | 4.20 |
| Median Family Income ($) | 81,219 | 81,009 | 82,203 | 2.3 | 78,964 | 76,401 | 73,891 |
| Median Sales Price (Existing Single-Family Home, $) | 316,200 | 314,800 | 309,500 | 15.2 | 272,333 | 259,458 | 247,508 |
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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