Home affordability improved in August 2022 as monthly mortgage payments fell

At the national level, housing affordability improved in August compared to the previous month, according to the NAR’s Housing Affordability Index. Compared to the previous month, monthly mortgage payments fell by 4.4%, but median household income increased by 0.3%, making it more affordable to buy a home in August. However, affordability is still significantly lower than it was a year ago.

Home prices fell in August as monthly mortgage payments rose 43.7% and median household income rose 3.1% compared to a year ago.Effective 30-year fixed mortgage interest rate1 Median existing home sales were up 7.6% from a year ago, up 5.29% this August, compared to 2.89% a year ago.

Bar Chart: Mortgage Rates from Aug 2021 to Aug 2022

As of August 2022, all country and region indices were above 100, except for the West, which had an index of 72.8. An index above 100 means that families with average income had more than they needed to buy an average-priced home. Income Required to Take Out a Mortgage, or Qualifying Income, is the income required for a 30-year fixed mortgage with a 20% down payment to account for 25% of the family’s income.2 The most affordable region was the Midwest, with an index value of 139.5 (median family income was $86,696 and eligible income was $62,160). The most affordable region remains the West, with an index of 72.8 (median family income $96,069, qualifying income $132,048). The Northeast was the second most affordable region with an index of 111.9 (median family income $100,017, eligible income $89,376). The South was the second most affordable region with an index of 104.1 (median family income $80,820, qualifying income $77,664).

A mortgage is affordable if your mortgage payments (principal and interest) are 25% or less of your family’s income.2

Bar Chart: Housing Affordability in August, 2022 and 2021
Bar Chart: Median and Eligible Income for U.S. and Regional Household Income

affordable housing3 were down double digits from a year ago in all four regions. The South showed the largest decline of 31.0%. In the Midwest and West, price growth slowed by 27.7%. The Northeast had the smallest drop of 23.3%.

Affordability rose across all regions from last month. The Northeast saw him rise 10.5%, followed by the Midwest he rose 4.1%. The West increased by 4.0%, followed by the South with the smallest increase of 3.8%.

Nationwide, mortgage rates rose 240 basis points (1 percentage point = 100 basis points) from a year ago to 5.29% from 2.89%.

Compared to a year ago, monthly mortgage payments increased from $1,224 to $1,759, an increase of 43.7%. Annual mortgage payments as a percentage of income rose from 17.2% a year ago to 23.9% in August, mainly due to higher mortgage rates. Geographically, the West has the highest proportion of mortgage payments to income, at 34.4% of income. The South had him second highest at 24.0%, followed by the Northeast where he had 22.3%. The Midwest had the lowest mortgage payment to income ratio at 17.9%. Mortgage payments are not a burden if they are less than 25% of your income.Four

Bar chart: US and regional mortgage payments as a percentage of income in 2022 and 2021
Line Chart: Monthly Mortgage Payments, August 2021 to August 2022
Line chart: median house price, August 2021 to August 2022

Last week, the Home Loan Bankers Association released data showing mortgage applications were down 2% from a week ago. Mortgage rates are still above 5%, but have fallen over the past two months. Monthly mortgage payments have also fallen in the past few months, easing the strain on your income. Home prices are still up 7%, but the median home price fell below $400,000 for the first time since March of this year. Rising home inventory and falling prices in a given market can help make it more likely that potential homeowners will purchase a home.

View data release.

The Housing Affordability Index calculation assumes a 20% down payment and a 25% eligibility ratio (principal and interest to income). For more information, methodology and assumptions behind the calculations.

1 Since May 2019, the FHFA has ceased publishing some mortgage rates and has only published variable rate mortgages called PMMS+ based on Freddie Mac Primary Mortgage Market Research. With these changes, the NAR will cease releasing his HAI Composite Index (based on 30-year fixed rate and ARM) and will only release HAI based on 30-year mortgages from May 2019. NAR is based on Freddie Mac’s 30-year fixed mortgage contract interest rate, 30-year fixed mortgage points and fees, and median loan value based on median NAR and 20% down payment, resulting in a 30-year effective fixed Calculate interest.

2 If your housing costs account for more than 30% of your income, the burden will be heavy. The 25% ratio of mortgage payments to income takes into account that homeowners bear additional costs such as mortgage insurance, home insurance, taxes, and property maintenance fees.

3 A Housing Affordability Index (HAI) value of 100 means that families with median income earn enough to qualify for a median home price mortgage . Index 120 is the amount of income a median income family would need to pay a median mortgage, assuming a 20% down payment with monthly payments and interest not exceeding 25%. It means 20% more than the level. of this level of income (eligible income).

Four Total housing costs, including mortgage payments, property taxes, maintenance, insurance, and utilities, are not considered a burden if they do not exceed 30% of your income.

Five Mortgage Bankers Association (MBA) analyzing data from Ellie Mae’s AllRegs┬« Market Clarity┬« business intelligence tool. A decline in the MCAI indicates tighter lending standards, while a rise in the index indicates looser credit.

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