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At the national level, housing affordability increased in January compared to the previous month, according to NAR’s Housing Affordability Index. The monthly mortgage payment decreased by 2.4% compared to the prior month, while the median price of single-family homes declined modestly by 0.3%. The monthly mortgage payment decreased by $49 from last month.
Compared to one year ago, affordability fell in January as the monthly mortgage payment climbed 9.1% and median family income rose by 5.3%. The effective 30-year fixed mortgage rate was 6.72% this January compared to 6.35% one year ago. Nationally, mortgage rates were up 37 basis points from one year ago (one percentage point equals 100 basis points). Mortgage rates moved below 7% for the second consecutive month. The median existing-home sales price rose 5.0% from ($383,500) one year ago ($372,000).
The national index is currently above 100, which means that the typical family can afford to buy based on the median-priced home. An index below 100 means that a family with a median income had less than the income required to afford a median-priced home. The income required to afford a mortgage, or the qualifying income is the income needed so that mortgage payments on a 30-year fixed mortgage loan with a 20% down payment account for 25% of family income. The most affordable region was the Midwest, with an index value of 143.9 (median family income of $97,908 with a qualifying income of $68,016). The least affordable region remained the West, where the index was 75.5 (median family income of $109,662 and the qualifying income of $145,296). The South was the second-most affordable region with an index of 106.3 (median family income of $92,529 and a qualifying income of $87,072). The Northeast was the second most unaffordable region with an index of 102.0 (median family income of $112,390 with a qualifying income of $110,160).
A mortgage is affordable if the mortgage payment (principal and interest) amounts to 25% or less of the family’s income.
Housing affordability declined in all four regions from a year ago. The Northeast region had the biggest decline, 8.6%, followed by the Midwest, which dipped 6.1%. The West experienced a weakening in price growth of 4.6%, followed by the South, which fell 2.2%.
Affordability rose in all four regions from last month. The South region had the biggest gain, 4.1%, followed by the West, which inclined by 4.0%. The Midwest region increased by 3.3%, followed by the Northeast region, which gained 0.6%.
Compared to one year ago, the monthly mortgage payment rose to $1,984 from $1,819, an increase of 9.1%. The monthly mortgage payment increased by $165 from a year ago. The annual mortgage payment as a percentage of income inclined to 23.7% this January from 22.9% a year ago. Regionally, the West has the highest mortgage payment to income share at 33.1% of income. The Northeast had the second-highest share at 24.5%, followed by the South at 23.5%. The Midwest had the lowest mortgage payment as a percentage of income at 17.4%. Mortgage payments are not burdensome if they are no more than 25% of income.
This week, the Mortgage Bankers Association reported that mortgage credit availability rose modestly by 0.2 and remains historically tight. Mortgage applications have increased 9.7% from one week prior. The coming down of mortgage rates has been impactful for potential home buyers. Median family incomes have increased while qualifying incomes have declined, which is also helping affordability conditions improve.
The Housing Affordability Index calculation assumes a 20% down payment and a 25% qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation.
