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Economy in Brief

U.S. Home Affordability Continues to Fall
by Tom Moeller  June 08, 2018

The National Association of Realtors reported that the Composite Index of Home Affordability declined 8.8% y/y during April to 145.8, the lowest level since October 2008. The index was 32.0% below its peak in January 2013. During the last ten years, there has been a 60% 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 5.5% y/y to $259,900. The price rise was accompanied by a higher average mortgage rate of 4.66%, up from a 3.43% in December 2012. Together, principal & interest payments rose to $1,073 or 17.1% of median income, the highest percentage since August 2007. That percentage compared to a low of 11.7% early in 2013. Growth in median family income slowed to 2.8% y/y from 3.9% during all of 2016.

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 Apr Mar Feb Apr Y/Y 2017 2016 2015
Composite Index 145.8 150.0 160.1 -8.8% 158.5 168.2 168.0
  Median Sales Price (Existing Single Family Home) $259,900 $251,500 $242,600 5.5% $247,508 $233,642 $221,350
  Monthly Mortgage Rate   4.66% 4.63% 4.42% 4.11% 4.20% 3.88% 4.03%
  Principal and Interest Payment $1,073 $1,035 $974 12.6% $967 $880 $849
  Median Family Income $75,093 $74,944 $74,828 2.8% $73,545 $70,941 $68,267
  Payment as a Percent of Income 17.1 16.6 15.6 15.6 15.8 14.9 14.9
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