At the national level, housing affordability declined in February compared to a year ago according to NAR's Housing Affordability Index. Affordability declined in February compared to January as the median family income rose by 3.5% while the monthly mortgage payment increased 5%. The effective 30-year fixed mortgage rate1 was 2.73% this February compared to 3.53% one year ago, but the median existing home sales price rose 16% from one year ago.

Line graph: Housing Affordability Index, February 2020 to February 2021

As of February 2021, the national and regional indices were all above 100, meaning that a family with the median income had more 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 make up 25% of family income.2 The most affordable region was the Midwest, with an index value of 230.7 (median family income of $84,595, which is more than twice the qualifying income of $36,672). The least affordable region remained the West, where the index was 117.9 (median family income of $92,172 and qualifying income of $78,192). The South was the second-most affordable region with an index of 180.5 (median family income of $78,311 and qualifying income of $43,392) The Northeast was the second most unaffordable region with an index of 170.5 (median family income of $96,972 with a qualifying income of $56,880).

Bar chart: U.S. and Regional Median Family Income and Qualifying Income

Housing affordability3 declined from a year ago in two of the four regions. The Northeast had the biggest decline of 7.0%. The Northeast region experienced the strongest price growth compared to a year ago of 23.1%. The West region fell of 1.3% and had the second strongest price growth of 21.2%. The South had a modest increase of 0.3%, followed by the Midwest with a gain of 0.1%.

Affordability is down in all four regions from last month. The West had the biggest decline of 9.8%, followed by the South which fell of 7.5%. The Midwest was down 6.5%, followed by the Midwest region with the smallest dip of 3.0%.

Nationally, mortgage rates were down 80 basis points from one year ago (one percentage point equals 100 basis points).

Bar chart: U.S. and Regional February Housing Availability, 2021 and 2020

Compared to one year ago, the monthly mortgage payment rose to $1,033 from $984, an increase of 5%. The annual mortgage payment as a percentage of income increased to 14.4% this February from 14.2% from a year ago due to higher incomes and lower interest rates. Regionally, the West has the highest mortgage payment to income share at 21.2 % of income. Home prices in the West have reached an all-time high of $500,100. The Northeast had the second highest share at 14.7%, followed by the South with its share at 13.9%. The Midwest had the lowest mortgage payment as a percentage of income at 10.8%. Mortgage payments are not burdensome if they are no more than 25% of income.4

Bar chart: U.S. and Regional Mortgage as a Percent of Income, 2021 and 2020

Incomes took a step back in February mostly due to the stimulus payments that boosted the incomes of many households. This week the Mortgage Bankers Association reported mortgage applications decreased 5.1% from one week earlier. Mortgage credit availability was unchanged in February. Refinance applications are also down for the fifth straight week.

What does housing affordability look like in your market? View the full data release.

The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation.


1 Starting in May 2019, FHFA discontinued the release of several mortgage rates and only published an adjustable rate mortgage called PMMS+ based on Freddie Mac Primary Mortgage Market Survey.  With these changes, NAR discontinued the release of the HAI Composite Index (based on 30-year fixed rate and ARM) and starting in May 2019 only releases the HAI based on a 30-year mortgage. NAR calculates the 30-year effective fixed rate based on Freddie Mac's 30-year fixed mortgage contract rate, 30-year fixed mortgage points and fees, and a median loan value based on the NAR median price and a 20 percent down payment.

2 The 25% mortgage payment to income share takes into consideration that a homeowner has other expenses such as property insurance, taxes, utilities, and maintenance, so that total housing expenses are no more than 30% of income. Housing costs are not burdensome if they account for no more than 30% of income.

3 A Home Affordability Index (HAI) value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).

4 Total housing costs that include mortgage payment, property taxes, maintenance, insurance, utilities are not considered burdensome of they account for no more than 30% of income.

Advertisement