U.S. Housing Affordability Declines in October
by:Tom Moeller
|in:Economy in Brief
Summary
- Home prices edge higher & mortgage rates rise.
- Median income improves.
- Affordability falls throughout the country.
The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) weakened 2.5% (+13.8% y/y) in October to 102.3 after rising 5.9% to 104.9 in September and 5.7% to 99.1 in August. The level of home affordability has risen 13.8% from its low of 89.9 in October 2023. It remains 42.9% below the high of 179.2 in April 2020.
The decline in affordability in October reflected a 0.2% rise (4.1% y/y) in the median price of an existing single-family home to $412,200. This followed three straight monthly declines from the record $432,900 in June. In October, the average mortgage rate climbed to 6.51% from 6.26% in September. It remained below a 7.14% May high but up sharply from the December 2020 low of 2.73%. The increases raised the principal & interest payment by 2.8% (-7.7% y/y) to $2,086 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged 24.4% of income during October versus 23.8% in September. They remained up from a low of 14.0% in April 2020.
The rise in housing costs was accompanied by improvement in median family income. It increased 0.3% in October (5.1% y/y) to a record $102,425 after rising 0.3% in September and 0.2% in August.
Housing affordability declined across the country in October. The index fell 1.9% (+10.0% y/y) to 133.1 in the Midwest, remaining the most affordable region of the country to live. In the South, the index declined 2.7% (+17.7% y/y) to 106.3 and the affordability index in the Northeast fell 0.6% (+8.1% y/y) to 94.9. In the West, where homes are the least affordable, the index weakened 4.2% (+13.9% y/y) to 71.2 in October.
The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022 (98.8).
Data on Housing Affordability can be found in Haver’s REALTOR database. Median home sales prices are also available in USECON. Higher frequency interest rate data are found in SURVEYS, 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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