Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Affordability Challenges Persist in July 2023

At the national level, housing affordability was flat in July compared to the previous month, according to NAR’s Housing Affordability Index. Compared to the prior month, the monthly mortgage payment increased by 0.5%, while the median price of single-family homes declined modestly by 0.8%. The monthly mortgage payment increased by $11 from last month.

Compared to one year ago, affordability fell in July as the monthly mortgage payment climbed 18.4% and median family income rose by 4.4%. The effective 30-year fixed mortgage rate1 was 6.92% this July compared to 5.48% one year ago, and the median existing-home sales price fell 1.6% from one year ago.

Line graph: Housing Affordability Index, July 2022 to July 2023
Line graph: Median Family Income vs Qualifying Income, July 2022 to July 2023
Bar graph: Mortgage Rates, July 2022 to July 2023

The national index is currently below 100, which means that the typical family cannot afford to buy based on the median-priced home. An index below 100 means that a family with a median income had less 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 115.6 (median family income of $90,146 with a qualifying income of $78,000). The least affordable region remained the West, where the index was 62.8 (median family income of $100,215 and the qualifying income of $159,456).  The South was the second most affordable region with an index of 88.6 (median family income of $84,101 and qualifying income of $94,896). The Northeast was the second most unaffordable region with an index of 86.7 (median family income of $104,035 with a qualifying income of $120,000).

A mortgage is affordable if the mortgage payment (principal and interest) amounts to 25% or less of the family’s income. Housing costs are burdensome if they take up more than 30% of income. The 25% share of mortgage payment to income takes into account that homeowners have additional expenses such as mortgage insurance, home insurance, taxes, and expenses for property maintenance.

Bar graph: U.S. and Regional July Housing Affordability, 2023 and 2022
Bar graph: U.S. and Regional Median Family Income and Qualifying Income

Housing affordability had double-digit declines from a year ago. The Northeast had the biggest decline of 14.4%, followed by the Midwest with a dip of 13.7%. The South experienced a weakening in price growth of 11.7%, followed by the West, which fell 10.3%.

Affordability was down in two of the four regions from last month. The Northeast region had the biggest gain of 1.4%, followed by the Midwest with a decline of 1.0%. The West region had the largest decrease of 1.7%, followed by the South region had the smallest decline of 1.0%.

Nationally, mortgage rates were up 144 basis points from one year ago (one percentage point equals 100 basis points) from 5.48 to 6.92%.

Compared to one year ago, the monthly mortgage payment rose to $2,177 from $1,839, an increase of 18.4%. Compared to a year ago, the monthly mortgage payment increased by $338. The annual mortgage payment as a percentage of income increased to 28.5% this July from 25.1% a year ago. Regionally, the West has the highest mortgage payment to income share at 39.8% of income. The Northeast had the second-highest share at 28.8%, followed by the South with a share of 28.2%. The Midwest had the lowest mortgage payment as a percentage of income at 21.6%. Mortgage payments are not burdensome if they are no more than 25% of income.

Line graph: Monthly Mortgage Payments, July 2022 to July 2023
Line graph: Median Home Prices, July 2022 to July 2023

Certain regions are still seeing multiple offers on homes which means the housing market is still competitive for some. Qualifying incomes continue to outpace median family incomes, making buying a home a challenge especially for first-time home buyers. Mortgage rates are still rising and pushing monthly mortgage payments higher. This week the Mortgage Bankers Association reported that mortgage applications declined by 0.8% from the week prior.

Read the 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% down payment.