U.S. Housing Affordability Increases in August

The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) increased 2.7% (1.4% y/y) during August to 100.5 after increasing 2.9% in July, revised from 4.0% and falling 2.1% in June. The index was at the highest level in four months, but remained 4.1% below the recent high of 104.8 in September of last year. The level of home affordability was 11.8% higher than its low of 89.9 in October 2023, but the latest level was 43.9% below the high of 179.0 in April 2020.

The rise in affordability in August occurred as the median price of an existing single-family home fell 1.0% (+1.9% y/y) to $427,800, and mortgage rates fell to 6.67% after declining to 6.80% in July. The price compared to the record $432,900 in June 2024. The fall in mortgage rates left them above their a low of 6.26% in September of last year, though below a 7.70% high in October of 2023. They remained well above a December 2020 low of 2.73%. In August, the principal & interest payment fell 2.3% (+2.9% y/y) to $2,202 per month, down 4.7% from June’s record high of $2,311, but still well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.9% of income during August, down from 25.5% in July and a high of 26.3% in June, but increased from a low of 14.0% of income in April 2020.

The decline in housing costs in August was accompanied by a rise in median family income, up 0.3% (4.4% y/y) to $106,243 after rising 0.3% in July. Qualifying income declined 2.3% (+2.9% y/y) to $105,696 after falling 2.5% during July.

Housing affordability improved m/m across the country in August. The index rose in the Midwest, the country’s most affordable region, by 2.6% (-1.1% y/y) to 125.2. In the South, the index increased 3.0% (3.3% y/y) to 107.5, while the affordability index in the Northeast improved 1.9% (-3.5% y/y) to 84.7. In the West, where homes are the least affordable, the index improved 1.5% (2.7% y/y) to 72.9 in August.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990. It reached an all-time high of 213.3 in January 2013.

Data on Housing Affordability can be found in Haver’s REALTOR database. Median home sales prices are also available in USECON. Higher frequency interest rate data are found in SURVEYS, WEEKLY, and DAILY.

The Economic Outlook and Monetary Policy from Fed Governor Michael S. Barr is available here.