U.S. Housing Affordability Falls Sharply in May
by:Tom Moeller
|in:Economy in Brief
Summary
- Home price increase remains strong.
- Mortgage rates rise.
- Income recovers earlier decline.
The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index fell 3.3% (-4.6% y/y) during May following a 0.9% April decline, revised from -1.7%. Affordability has fallen for four straight months. These declines followed three months of increase, but the index is down 47.8% from its April 2020 peak.
The May decline in affordability occurred as the median price of an existing single-family home increased 2.8% (-3.4% y/y) to $401,100 after rising the same 2.8% in April. The monthly principal plus interest payment rose 3.7% (9.9% y/y) to $2,030. It hit a low of $1,819 in January. Median family income improved 0.3% (4.8% y/y) after falling 0.2% in April.
The mortgage payment as a percent of income rose to 26.7% from 25.8% in April, but remained down from the 27.4% high in October of last year. The monthly mortgage rate rose to 6.51% in May, but remained below its 6.98% high this past October.
Monthly changes in affordability were mixed amongst the four Census regions during May. Affordability fell 4.4% (-10.1% y/y) in the Northeast and by 4.3% (-2.0% y/y) in the West. In the Midwest, home affordability fell 4.7% (-8.8% y/y) while in the South, home affordability declined 3.0% (-4.9% y/y).
The Housing Affordability Index equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. Until the HAI fell below 100 in May 2022 (98.3), it had exceeded 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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