Economists' Outlook

Housing stats and analysis from NAR's research experts.

Housing Affordability Declines in February

At the national level, housing affordability fell in February compared to the previous month according to NAR’s Housing Affordability Index. Compared to the prior month, the monthly mortgage payment increased by 6.1% while the median family income rose modestly by 0.4%.

Compared to one year ago, affordability declined in February as the monthly mortgage payment increased by 30.4% and median family income rose by 3.6%. The effective 30-year fixed mortgage rate1 was 3.83% this February compared to 2.86% one year ago, and the median existing-home sales price rose 15.5% from one year ago.

Housing Affordability Index, April 2022
Median Family Income
  • As of February 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 192.8 (median family income of $87,172 with a qualifying income of $45,216). The least affordable region remained the West, where the index was 102.1 (median family income of $94,719 and the qualifying income of $92,784).  The South was the second most affordable region with an index of 137.8 (median family income of $80,887 and the qualifying income of $58,704). The Northeast was the second most unaffordable region with an index of 142.3 (median family income of $100,348 with a qualifying income of $70,512).
  • 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.2
February Housing Affordability
Median Family Income & Qualifying Income
  • Housing affordability3 declined from a year ago in all four regions. The South had the biggest decline of 22.3%. The Midwest region experienced a weakening in price growth compared to a year ago of 14.7%. The Northeast fell 14.5% followed by the West which had the smallest dip of 13.5%.
  • Affordability was down in all regions from last month. The South region fell 5.3% followed by the Midwest with a decline of 5.0%. The West was down 4.4% followed by the Northeast which had the smallest decrease of 3.9%.
  • Nationally, mortgage rates were up 97 basis points from one year ago (one percentage point equals 100 basis points) from 2.86 to 3.83%.
  • Compared to one year ago, the monthly mortgage payment rose to $1,361 from $1,044, an increase of 30.9%, The annual mortgage payment as a percentage of income inclined to 5.7% this February from 25.9% a year ago due to higher home prices compared to lesser gains in median family incomes. Regionally, the West has the highest mortgage payment to income share at 24.5% of income. The South had the second highest share at 18.1% followed by the Northeast with their share at 17.6%. The Midwest had the lowest mortgage payment as a percentage of income at 13.0 %. Mortgage payments are not burdensome if they are no more than 25% of income.4
Mortgage Payment as a Percentage of Income
Monthly Mortgage Payments
  • According to the Mortgage Bankers Association5 last week, mortgage applications decreased 6.3 percent from one week earlier. Credit availability declined in March. The challenges of buying a home continue as monthly payments increase with higher mortgage rates. First-time home buyers are having to deal with double-digit home price growth while incomes are trailing behind at 3.6%.
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

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 percent down payment.

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.

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).

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.

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.