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Economy in Brief

U.S. Home Affordability Is Eroded by Higher Prices
by Tom Moeller  June 10, 2016

The National Association of Realtors reported that the Composite Index of Home Affordability declined 4.5% during April to 162.4, the lowest level since August. The index was 24.3% lower than its peak in January 2014. 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.

Strong home sales, which are near the highest level since early-2007, have been accompanied by higher prices. The median sales price of an existing home strengthened 4.8% (6.2% y/y) to $233,700, the highest level since June. The price rise was accompanied by an average mortgage rate of 3.89%, little changed m/m and the lowest level in nearly three years. Together, principal & interest payments rose to $881, or 15.4% of median income. That percentage 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.

To Reshore or Not to Reshore, That Is the Question from the Federal Reserve Bank of Atlanta is available here.

Housing Affordability Apr Mar Feb Apr Y/Y 2015 2014 2013
Composite Index 162.4 170.1 173.8 -3.0% 166.1 167.8 179.7
  Median Sales Price (Existing Single Family Home) $233,700 $223,100 $213,600 6.2% $221,350 $207,125 $195,933
  Monthly Mortgage Rate   3.89% 3.87% 4.04% 3.95% 4.03% 4.30% 4.00%
  Principal and Interest Payment $881 $839 $820 5.5% $849 $820 $750
  Median Family Income $68,665 $68,509 $68,405 2.3% $67,507 $65,910 $64,030
  Payment as a Percent of Income 15.4 14.7 14.4 14.9 15.1 14.9 14.0
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