U.S. Housing Affordability Declines Further in June
by:Tom Moeller
|in:Economy in Brief
Summary
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Higher prices & interest rates couple to reduce affordability.
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Median family income fails to keep pace with home costs.
The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index fell 3.6% in June (-31.2% y/y) to 98.5 after a 5.5% May shortfall. Affordability has declined for nine straight months, off 34.1% during that span. The affordability level was the lowest since June 1989 and down 45.7% since its recent peak in January 2021.
The Realtors Association indicated that, "Mortgage rates have calmed down in recent weeks, and the consistent wage growth ... is narrowing the gap with home-price growth."
Affordability was reduced in June as the median sales price of a home rose 1.9% (13.3% y/y) to a record $423,300 following a 3.4% May gain. This raised principal & interest payments to a record $1,944 per month, up 53.7% y/y. The effective mortgage interest rate rose to 5.60% in June from 5.31% in May. It was the highest rate since November 2008 and up from 2.73% in December 2020.
Median family income rose 1.4% in June (5.8% y/y) to $91,952 following two consecutive 0.7% increases. It remained 3.9% below the March 2021 high of $95,696. Mortgage payments as a percent of income increased to 25.4% from 24.5% in May, up from a recent low of 13.8% in January 2021.
The Housing Affordability Index equals 100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. This index has been above 100 in each month since July 1990, reaching its all-time high of 213.3 in January 2013.
Data on Housing Affordability can be found in Haver's REALTOR database. Median home sale prices are also located in USECON. Higher frequency interest rate data can be found in SURVEYW, WEEKLY, and DAILY.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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