At the national level, housing affordability showed signs of improvement in May 2020 compared to a year ago but fell compared to April, according to NAR’s Housing Affordability Index. Home price growth slowed as median home prices rose 2.4 % in May from one year ago. The effective 30-year fixed mortgage rate1 fell to 3.29% this May from 3.37% in April. Mortgage rates are much lower compared to a year ago at 4.11%.

Line graph: Housing Affordability Index May 2019 to May 2020

As of May 2020, 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 no more than 25% of family income. The most affordable region was the Midwest, with an index value of 208.6 (median family income of $80,405 which is more than twice the qualifying income of $38,544). The least affordable region remained the West, where the index was 126.2 (median family income of $87,654 and the qualifying income of $69,456).  For comparison, the index was 178.2 in the South (median family income of $75,450 and the qualifying income of $42,336) and 167.6 in the Northeast (median family income of $93,577 with a qualifying income of $55,824).

Bar chart: U.S. and Regional Income/Qualifying Income

Housing affordability2 increased from a year ago in all four regions. Three of the four regions showed double-digit inclines. The West had the biggest gain of 15.1% followed by the South with an incline of 13.5%. The Midwest had an incline of 11.6% followed by the Northeast with the smallest increase of 5.4%.

Affordability is down in all four regions from last month except the West where there was a modest incline of 0.5%. The Northeast had the largest decline of 7.8% followed by the Midwest with a dip of 1.4%. The South had the smallest reduction of 0.8%.  

Nationally, mortgage rates were down 82 basis points from one year ago (one percentage point equals 100 basis points). The median sales price for a single-family home sold in May in the US was $287,700 up 2.4% from a year ago, while median family incomes rose 4.1 % in 2020 from one year ago.

Bar chart: May Housing Affordability 2020 and 2019

With lower mortgage rates compared to one year ago, the payment as a percentage of income fell to 14.8% this May from 16.6% from a year ago. Regionally, the West has the highest mortgage payment to income share at 19.8% of income. The Northeast had the second highest share at 14.9% followed by the South with their share at 14.0%. The Midwest had the lowest mortgage payment as a percentage of income at 12.0%.

Bar chart: U.S. and Regional Payment as a Percent of Income 2020 and 2019

Last week the MBA reported mortgage applications increased 2.2% compared to the week prior. Refinance applications increased modestly 0.4% from the previous week. Median family income growth was almost double home price growth in May. There is still plenty of demand for housing and potential homeowners can take advantage of record-low mortgage rates. Housing remains an important component of our economy.

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

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.


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 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% more than the level of income needed to pay the mortgage on a median-priced home, assuming a 20% down payment so that the monthly payment and interest will not exceed 25% of this level of income (qualifying income).

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