U.S. Housing Affordability Improves Slightly in February

The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.5% (0.1% y/y) in February to 102.2 after rising 0.8% to 101.7 in January and rising 1.5% in December to 100.9. The level of home affordability has risen 13.7 % from its low of 89.9 in October 2023. It remains 43.0% below the high of 179.2 in April 2020.

The rise in affordability in February came with a 1.1% increase (3.7% y/y) in the median price of an existing single-family home to $402,500 which was offset by a decline in mortgage rates to 6.92% from 7.04% in January. The price increase was the first in the last four months, and the price compared to the record $432,900 in June. The decline in mortgage rates compared to a September low of 6.26% and a 7.70% high during October of 2023. It remained increased from a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.1% (+4.4% y/y) to $2,125 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a fairly steady 24.5% of income during February. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in February was accompanied by improvement in median family income. It increased 0.4% (4.5% y/y) to a record $104,287 after rising 0.7% in January and 0.3% in December.

Housing affordability was mixed m/m across the country in February. The index fell 0.7% (-1.9% y/y) to 134.2 in the Midwest. It remains the most affordable region of the country. In the South, the index eased 0.1% (+2.2% y/y) to 104.9 and the affordability index in the Northeast increased 4.8% (-2.1% y/y) to 98.7. In the West, where homes are the least affordable, the index rose 1.3% (0.3% y/y) to 71.2 in February.

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.

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.