ShareAt the national level, housing affordability declined in November, according to NAR’s Housing Affordability Index. Although affordability declined, the index fell below 100 after two consecutive months above, standing at 99.0. Higher mortgage rates and increasing qualifying incomes affected affordability in November, making it less affordable to purchase a home.
Compared to one year ago, affordability increased in November as the monthly mortgage payment declined by 1.6% and median family income rose by 5.1%. This reduction in mortgage payments was primarily due to lower mortgage rates in November, which were down 63 basis points from one year ago (one percentage point equals 100 basis points). Specifically, the effective 30-year fixed mortgage rate was 6.89% this October compared to 7.52% one year ago. The median existing-home sales price rose 4.8% ($410,900) compared to one year ago ($392,200).
Compared to the prior month, the monthly mortgage payment increased by 3.8% while the median price of single-family homes fell by 0.2%. The monthly mortgage payment increased by $79 from last month.
The national index is currently below 100, which means that the typical family earns less than the income needed to afford a median-priced home. An index above 100 means that a family with a median income has 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 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 129.9 (median family income of $99,981 with a qualifying income of $76,992). The least affordable region remained the West, where the index was 68.9 (median family income of $111,089 and the qualifying income of $161,280). The South was the second most affordable region with an index of 102.3 (median family income of $95,251 and qualifying income of $93,072). The Northeast was the second most unaffordable region with an index of 91.3 (median family income of $112,276 with a qualifying income of $123,024).
A mortgage is affordable if the mortgage payment (principal and interest) amounts to 25% or less of the family’s income.
Housing affordability increased in three of the four regions from a year ago. The Northeast region was flat. The South had the biggest gain of 9.1%, followed by the West with an increase of 8.2%. The Midwest had the smallest rise of 4.1%.
Affordability decreased in all four regions from last month. The South and Northeast regions shared the most significant decline of 3.8%. The West region fell by 3.2%, followed by the Midwest with the smallest dip of 2.3%.
Compared to one year ago, the monthly mortgage payment fell to $2,163 from $2,198, a decline of 1.6% or $35. The annual mortgage payment as a percentage of income declined to 25.2% this November from 27.0% from a year ago.
Regionally, the West has the highest mortgage payment to income share at 36.3% of income. The Northeast had the second-highest share at 27.4%, followed by the South at 24.4%. The Midwest had the lowest mortgage payment as a percentage of income at 19.3%. Mortgage payments are not burdensome if they are no more than 25% of income.
The index in November was below 100, meaning the typical family cannot afford a home. Mortgage rates rose in November, pushing the cost of home ownership higher. Last week, the Mortgage Bankers Association reported that mortgage credit availability increased 0.7% from a week earlier. Mortgage applications decreased 3.7% from one week prior.
Read the full data release here.
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 here.
