The National Association of Realtors Composite Index of Home Affordability declined 3.7% during May to 159.7 (-0.9% y/y), down for the fourth consecutive month. The decline was driven by a 4.7% rise in home prices which have increased 8.6% during the last twelve months. During the last ten years there has been a 69% correlation between the affordability index level and new plus existing single-family home sales.

The rise in home prices offset a dip in mortgage interest rates to 3.9%, the lowest level since June 2013. As a result, principal plus interest payments amounted to $869 per month, up 3.1% y/y. This increase outpaced the 2.1% y/y rise in medium family incomes. Mortgage payments as a percent of income rose to the highest level (15.7%) in nine months.

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.

Recent Developments and the Outlook for the Economy is the title of today's speech by Fed Chair Janet L. Yellen and it can be found here.