Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Affordability Conditions Fade as Mortgage Rates Push Monthly Payments Higher in June 2022

At the national level, housing affordability weakened in June compared to the previous month, according to NAR's Housing Affordability Index. The monthly mortgage payment increased by 5.3% compared to the prior month, while the median family income increased by 1.4%.

Compared to one year ago, affordability fell in June as the monthly mortgage payment climbed 53.7% and median family income rose by 5.8%. The effective 30-year fixed mortgage rate1 was 5.60% this June compared to 3.03% one year ago, and the median existing-home sales price rose 13.3% from one year ago. June's affordability index figure of 98.5 is the lowest since June 1989.

Line graph: Housing Affordability Index, June 2021 to June 2022
Bar graph: Mortgage Rates, June 2021 to June 2022

As of June 2022, the national and regional indices were all above 100, except in the West, where the index was 69.6. An index above 100 means that a family with the median income had more than the income required to afford a median-priced home. The income necessary 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.1The most affordable region was the Midwest, with an index value of 132.3 (median family income of $90,650 with a qualifying income of $68,496). The least affordable region remained the West, where the index was 69.6 (median family income of $98,498 and the qualifying income of $141,552). This would be the fourth consecutive month that the West's index was below 100. The Northeast was the second most affordable region with an index of 102.3 (median family income of $104,351 and the qualifying income of $102,000). The South was the second most unaffordable region with an index of 99.3 (median family income of $84,114 with a qualifying income of $84,672).

A home purchase was unaffordable for a typical first-time buyer intending to purchase a typical home. First-time buyers typically spend 25.6% of their family income on mortgage payments, making a home purchase unaffordable. A mortgage is affordable if the mortgage payment (principal and interest) amounts to 25% or less of the family's income.2
Bar graph: June U.S. and Regional Housing Affordability, 2022 and 2021
Bar graph: U.S. and Regional Median Family Income and Qualifying Income

Housing affordability3 had double-digit declines from a year ago in all four regions. The South had the biggest decline of 32.9%. The South experienced a weakening in price growth of 29.4%, followed by the Northeast at 29.1%. The West had the smallest dip of 28.7%.

Affordability was down in all regions from last month. The Northeast region fell 7.8%, followed by the Midwest with a decline of 5.7%. The South was down 2.8%, followed by the West, which had the smallest decrease of 0.6%.

Nationally, mortgage rates were up 257 basis points from one year ago (one percentage point equals 100 basis points), from 3.03 to 5.60%.

Compared to one year ago, the monthly mortgage payment rose to $1,944 from $1,265, an increase of 53.7%. The annual mortgage payment as a percentage of income increased to 25.4% this June from 17.5% a year ago, mainly due to higher home prices and higher mortgage rates. Regionally, the West had the highest mortgage payment to income share at 35.9% of income. The South had the second highest share at 25.2%, followed by the Northeast at 24.4%. The Midwest had the lowest mortgage payment as a percentage of income at 18.9%. Mortgage payments are not burdensome if they are no more than 25% of income.4
Bar graph: U.S. and Regional Mortgage Payment as Percent of Income, 2022 and 2021
Line graph: Monthly Mortgage Payments, June 2021 to June 2022
Line graph: Median Home Prices, June 2021 to June 2022

This week, the Mortgage Bankers Association released data showing that mortgage applications increased 0.2% from one week earlier.5 Mortgage rates continued to climb in June, putting some potential home buyers out of the market. Monthly mortgage payments have soared compared to last year, and rising home prices are not helping affordability conditions. One good sign for the housing market is a welcome increase in the supply of inventory. Another is that rates recently have cooled, slowing the pace of growing monthly mortgage payments. Demand has waned some with mortgage rates consistently climbing, which may help minimize some competition for those who still desire to own a home. With higher rates and home prices, homeowners still find home ownership a means of building long-term wealth.

Read 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% down payment.

2 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.

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% more than the level of income needed 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).

4 Total housing costs that include mortgage payment, property taxes, maintenance, insurance, and utilities are not considered burdensome of they account for no more than 30% of income.

5 The Mortgage Bankers Association (MBA) analyzes data from Ellie Mae's AllRegs® Market Clarity® business information tool. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.