Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Affordability Continued to Improve in August

At the national level, housing affordability increased for the second consecutive month in August compared to the previous month according to NAR's Housing Affordability Index. Compared to the prior month, affordability improved as the monthly mortgage payment fell by 1.1% while the median family income fell modestly by 0.7%.

Compared to one year ago, affordability declined in August as the median family income rose by 3.9% while the monthly mortgage payment increased 13.9%. The effective 30-year fixed mortgage rate1 was 2.89% this August compared to 3.00% one year ago, and the median existing-home sales price rose 15.6% from one year ago.

Line graph: Housing Affordability Index, August 2020 to August 2021
Line graph: Median Family Income, August 2020 to August 2021

As of August 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 on a 30-year fixed mortgage loan with 20% down payment account for 25% of family income.2 The most affordable region was the Midwest, with an index value of 196.8 (median family income of $86,614 with the qualifying income of $44,016). The least affordable region remained the West, where the index was 114.9 (median family income of $94,372 and the qualifying income of $82,128). The South was the second most affordable region with an index of 160.6 (median family income of $80,180 and the qualifying income of $49,920) The Northeast was the second most unaffordable region with an index of 149.1 (median family income of $99,286 with a qualifying income of $66,576).

Bar graph: August Housing Affordability, 2021 and 2020
Bar graph: U.S. and Regional Median Family Income and Qualifying Income

Housing affordability3 declined from a year ago in all the four regions. The Northeast had the biggest decline of 10.7%. The South region experienced a weakening in price growth compared to a year ago of 7.1% followed by the West with a dip of 4.9%. The Midwest had the smallest decrease of 4.8%.

Affordability is up modestly in all four regions from last month except the West where there was no change. The South had the biggest gain of 0.4% followed by the Midwest which rose 0.3%. The Northeast region had the smallest increase of 0.2%.

Nationally, mortgage rates were down 11 basis point from one year ago (one percentage point equals 100 basis points).

Compared to one year ago, the monthly mortgage payment rose to $1,210 from $1,062, an increase of 13.9%, The annual mortgage payment as a percentage of income increased to 16.5% this August from 15.1% from a year ago due to higher home prices and only modest gains in median family incomes. Regionally, the West has the highest mortgage payment to income share at 21.8 % of income. The Northeast had the second highest share at 16.8% followed by the South with their share at 15.6%. The Midwest had the lowest mortgage payment as a percentage of income at 12.7%. 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, 2021 and 2020
Line graph: Monthly Mortgage Payments, August 2020 to August 2021

Mortgage rates have fallen back to back months and are historically low below 3%. Home price growth has also slowed down which is a good sign for first-time home buyers who have been priced out of the market. As such, the income needed to afford a mortgage (qualifying incomes) has declined since June due to the seasonal decline in home prices and continued decline in mortgage rates.

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 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% 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.