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Economy in Brief

U.S. Home Affordability Deteriorates as Home Prices Rise
by Tom Moeller  May 9, 2016

The National Association of Realtors reported that the Composite Index of Home Affordability declined 2.6% during April to 169.3 following two months of increase. The index remained down 2.4% versus 12-months earlier. During the last ten years, there has been a 62% correlation between the affordability index level and the y/y change in existing single-family home sales.

The median sales price of an existing home strengthened 5.0% (5.8% y/y) to the highest level in three months. The rise was partially offset by a decline in the average mortgage rate to 3.87%, the lowest level in nearly three years. On balance, principal & interest payments rose to $843, or 14.8% of median income. That compared to a low of 11.7% early in 2013.

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.

Housing Affordability Mar Feb Jan Mar Y/Y 2015 2014 2013
Composite Index 169.3 173.8 171.2 -2.4% 166.1 167.8 179.7
  Median Sales Price (Existing Single Family Home) $224,300 $213,600 $214,800 5.8% $221,350 $207,125 $195,933
  Monthly Mortgage Rate   3.87% 4.04% 4.12% 3.95% 4.03% 4.30% 4.00%
  Principal and Interest Payment $843 $820 $832 4.7% $849 $820 $750
  Median Family Income $68,509 $68,405 $68,379 2.1% $67,507 $65,910 $64,030
  Payment as a Percent of Income 14.8 14.4 14.6 14.4 15.1 14.9 14.0
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