U.S. Housing Affordability Is Little Changed in January
by:Tom Moeller
|in:Economy in Brief
Summary
- Home prices ease but mortgage rates rise.
- Median income strengthens.
- Affordability weakens in most of country.
The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) eased 0.2% (-3.6% y/y) in January to 100.7 after rising 1.5% to 100.9 in December and falling 2.9% in November to 99.4. The level of home affordability has risen 12.0% from its low of 89.9 in October 2023. It remains 43.8% below the high of 179.2 in April 2020.
The slip in affordability in January reflected a 1.6% drop (+5.0% y/y) in the median price of an existing single-family home to $402,000 which was offset by a rise in mortgage rates to 7.04% from 6.80% in December. The price decline was the sixth in the last seven months from the record $432,900 in June. The rise in mortgage rates compared to a September low of 6.26% and a 7.14% high during May. It remained increased from a December 2020 low of 2.73%. These changes raised the principal & interest payment by 0.8% (8.4% y/y) to $2,148 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a steady 24.8% of income during January. They remained up from a low of 14.0% in April 2020.
The rise in housing costs in January was accompanied by improvement in median family income. It increased 0.7% (4.5% y/y) to a record $103,850 after rising 0.3% in December and 0.4% in November.
Housing affordability was mixed m/m across the country in January. The index rose 0.4% (-5.9% y/y) to 134.2 in the Midwest. It remains the most affordable region of the country. In the South, the index eased 0.6% (-2.5% y/y) to 103.3 and the affordability index in the Northeast fell 1.9% (-8.7% y/y) to 89.9. In the West, where homes are the least affordable, the index weakened 1.8% (-5.5% y/y) to 69.8 in January.
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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