Housing Affordability Weakens as Prices Surge
October 13, 2020
Housing affordability declined in August compared to a year ago, despite median incomes rising. However, the jump in home prices—up 11.7%—was way above family income increases of 2.2%, the National Association of REALTORS® reports.
Mortgage rates are helping to offset some of those high home prices, however. A 30-year fixed-rate mortgage dropped to 3% in August and has averaged below 3% in the past few weeks, the lowest on record.
National and regional indices measuring housing affordability were all above 100 in August, which indicates that a family with the median income had more than the income required to afford a median-priced home, NAR reports.
The most affordable region of the United States is the Midwest, where the median family income of $79,570 is nearly double the qualifying income—$40,320—needed to buy a home.
On the other hand, the least affordable region remains the West, where the median family income of $86,744 compares with a qualifying income of $75,072 to purchase a home.
Still, affordability was down in all four of the major regions of the U.S. last month. The Northeast saw the largest decline: 5.8%.
The median sales price for a single-family home that sold in August was $315,000—up 11.7% from a year ago.
But even with lower mortgage rates, the percent of income increased. The mortgage payment as a percent of income was 15.7% nationally in August.
“Housing Affordability Weakens in August 2020 as Home Prices Rose Faster Than Median Family Incomes,” National Association of REALTORS® Economists’ Outlook blog (Oct. 9, 2020)
Updated: October 23, 2020