U.S. Housing Affordability Declines Sharply in January
by:Tom Moeller
|in:Economy in Brief
Summary
- Higher mortgage rates drive affordability lower.
- Principal & interest payments surge.
- Payment as a percent of income moves up roughly four percentage points y/y.
Affordable homes were increasingly difficult find in January, even though incomes rose. The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index fell 2.8% in January to 143.0 from 147.1 in December. Affordability has fallen 22.2% since its recent high of 183.8 in January 2021, which was revised from 187.8. The Housing Affordability Index equals 100 when median family income equals the amount required for an 80% mortgage on a median-priced existing single-family home.
In January, a 1.2% decline (+15.9% y/y) in the median sales price of a home to $357,100 was accompanied by a rise in mortgage rates to 3.51% in January, up from 2.79% twelve months earlier. As a result, the monthly mortgage payment rose 3.4% to a record $1,284 (27.0% y/y) from $1,242 in December.
Median family income in January rose 0.5% (-1.2% y/y) to $88,114 from $87,683 in December. Consequently, the standard mortgage payment as a percent of income rose to 17.5%, the highest level since August 2018. These figures are up from a recent low of 13.6% in January 2021.
Data on Housing Affordability can be found in Haver's REALTOR database. Median home sale prices are also located in USECON. Higher frequency interest rate data can be found in SURVEYW, WEEKLY, and DAILY.
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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