At the national level, housing affordability increased in January 2021 compared to a year ago according to NAR’s Housing Affordability Index. Affordability increased in January compared to December as the median family income jumped by 9.4% while the monthly mortgage payment only increased 1.8% from one year ago due to lower mortgage rates. The effective 30-year fixed mortgage rate1 was flat 2.73% this January from 2.73% in December 2020. Mortgage rates are at all time lows compared to a year ago at 3.68%.

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

As of January 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 account for 25% of family income.2 The most affordable region was the Midwest, with an index value of 247.1 (median family income of $88,954 which is more than twice the qualifying income of $36,000). The least affordable region remained the West, where the index was 131.4 (median family income of $96,921 and the qualifying income of $73,776). The South was the second most affordable region with an index of 195.4 (median family income of $82,346 and the qualifying income of $42,144) The Northeast was the second most unaffordable region with an index of 175.7 (median family income of $101,968 with a qualifying income of $58,032).

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

Housing affordability3 increased from a year ago in all regions. The Northeast had an increase of 4.0% followed by the Midwest with a gain of 7.2%. The South had an increase of 7.5% followed by the West region had the biggest increase in affordability at 9.5%.

Affordability is up in all four regions from last month. The Northeast had an increase of 6.4% followed by the West with an increase of 8.1%.  The South had an increase of 9.5% followed the Midwest with the biggest gain of 9.8%.

Nationally, mortgage rates were down 95 basis point from one year ago (one percentage point equals 100 basis points).

Bar chart: U.S. and Regional January Housing Affordability, 2021 and 2020

Compared to one year ago, the payment as a percentage of income declined to 13.4% this January from 14.3% from a year ago due to higher incomes and lower interest rates. Regionally, the West has the highest mortgage payment to income share at 19.0 % of income. The Northeast had the second highest share at 14.2% followed by the South with their share at 12.8%. The Midwest had the lowest mortgage payment as a percentage of income at 10.1%. Mortgage payments are not burdensome if they are no more than 25% of income.4

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

This week the Mortgage Bankers Association reported mortgage applications decreased 1.3% from one week earlier. Mortgage credit availability increased in January. Low inventory remains an issue for potential home buyers. Mortgage rates are expected to rise in the near future. Higher rates will most likely mean less home owners will be looking to refinance and or move.

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

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 here.


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% 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.

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