Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Affordability Conditions Take a Hit in March

At the national level, housing affordability declined in March compared to the previous month according to NAR's Housing Affordability Index. Compared to the prior month, the monthly mortgage payment increased by 9.7% while the median family income increased by 1.1%.

Compared to one year ago, affordability declined in March as the monthly mortgage payment climbed 32.0% and median family income fell by 6.6%. The effective 30-year fixed mortgage rate1 was 4.24% this March compared to 3.14% one year ago, and the median existing-home sales price rose 15.2% from one year ago.

Line graph: Housing Affordability Index, March 2021 to March 2022
Line graph: Median Family Income, March 2021 to March 2022

As of March 2022, 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 on a 30-year fixed mortgage loan with a 20% down payment account for 25% of family income.2 The most affordable region was the Midwest, with an index value of 170.6 (median family income of $88,115 with a qualifying income of $51,648). The least affordable region remained the West, where the index was 97.1 (median family income of $95,743 and the qualifying income of $98,592). The index in the West has not been under 100 since July 2008. The South was the second most affordable region with an index of 124.6 (median family income of $81,761 and the qualifying income of $65,616). The Northeast was the second most unaffordable region with an index of 135.1 (median family income of $101,433 with a qualifying income of $75,072).

A home purchase was unaffordable for a typical first-time buyer intending to purchase a typical home. First-time buyers typically spent 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.3

Bar graph: March Housing Affordability, 2022 and 2021
Bar graph: U.S. and Regional Median Family Income and Qualifying Income

Housing affordability4 had double-digit declines from a year ago in all four regions. The South had the biggest decline of 32.6%. The Midwest region experienced a weakening in price growth compared to a year ago of 26.1%. The Northeast fell 24.0% followed by the West which had the smallest dip of 21.5%.

Affordability was down in all regions from last month. The Midwest region fell 11.6% followed by the South with a decline of 8.0%. The Northeast was down 5.1% followed by the West which had the smallest decrease of 4.9%.

Nationally, mortgage rates were up 110 basis points from one year ago (one percentage point equals 100 basis points) from 3.14 to 4.24%.

Compared to one year ago, the monthly mortgage payment rose to $1,502 from $1,138, an increase of 32%. The annual mortgage payment as a percentage of income increased to 20.2% this March from 14.3% a year ago due to higher home prices compared to declines in median family incomes. Regionally, the West has the highest mortgage payment to income share at 25.7% of income. The South had the second highest share at 20.1% followed by the Northeast with a share at 18.5%. The Midwest had the lowest mortgage payment as a percentage of income at 14.7%. Mortgage payments are not burdensome if they are no more than 25% of income.5

Bar graph: U.S. and Regional Mortgage Payment as Percent of Income, 2022 and 2021
Line graph: Monthly Mortgage Payments, March 2021 to March 2022
Bar graph: Mortgage rates, March 2021 to March 2022

According to the Mortgage Bankers Association last week, mortgage applications increased 2.4% from one week earlier. The key factors of housing affordability are currently very challenging to overcome. Low inventory is carrying a substantial portion of that burden. Qualifying incomes have inclined, spikes in mortgage rates and incomes struggling behind home price gains are the main contributing factors for potential buyers to struggle to find a home.

What does housing affordability look like in your market? View 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, utilities are not considered burdensome if they account for no more than 30% of income.

5 The Mortgage Bankers Association (MBA) that 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.