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Economy in Brief

U.S. Home Affordability Declines to 2008 Low
by Tom Moeller  August 10, 2016

The National Association of Realtors reported that the Composite Index of Home Affordability declined 3.8% during June to 153.3, the lowest level since November 2008. The index was 28.5% below its peak in January 2013. During the last ten years, there has been a 63% correlation between the affordability index level and the y/y change in existing single-family home sales.

Higher prices have reduced affordability. The median sales price of an existing home strengthened 4.0% to a record high of $249,800, up 5.0% y/y. The price rise was accompanied by an average mortgage rate of 3.84%, little changed m/m at the lowest level in nearly three years. Together, principal & interest payments rose to $936 or 16.3% of median income, the highest percentage since November 2008. 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.

Housing Affordability Jun May Apr Jun Y/Y 2015 2014 2013
Composite Index 153.3 159.3 163.7 -1.0% 166.1 167.8 179.7
  Median Sales Price (Existing Single Family Home) $249,800 $240,300 $232,000 5.0% $221,350 $207,125 $195,933
  Monthly Mortgage Rate   3.84% 3.83% 3.89% 3.95% 4.03% 4.30% 4.00%
  Principal and Interest Payment $936 $899 $874 3.1% $849 $820 $750
  Median Family Income $68,897 $68,759 $68,665 2.1% $67,507 $65,910 $64,030
  Payment as a Percent of Income 16.3 15.7 15.3 16.1 15.1 14.9 14.0
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