Economists' Outlook

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Housing Affordability Slips in June 2020 as Median Family Income Falls

At the national level, housing affordability showed signs of improvement in June 2020 compared to a year ago but fell compared to May, according to NAR’s Housing Affordability Index. Affordability worsened in June compared to May as the median family income slightly declined by 1% while the median home prices rose by 4%. Compared to one year ago, home prices were up 3.5%, about the same pace as the 3.4% increase in median family income. The effective 30-year fixed mortgage rate1 fell to 3.22% this June from 3.29% in May. Mortgage rates are much lower compared to a year ago at 3.84%.

Line graph: NAR Housing Affordability Index June 2019 to June 2020

As of June 2020, 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 make up no more than 25% of family income. The most affordable region was the Midwest, with an index value of 201.0 (median family income of $79,977 which is more than twice the qualifying income of $39,792). The least affordable region remained the West, where the index was 119.3 (median family income of $87,188 and the qualifying income of $73,056). For comparison, the index was 170.3 in the South (median family income of $75,049 and the qualifying income of $44,064) and 166.3 in the Northeast (median family income of $93,968 with a qualifying income of $55,968).

Bar chart: Median Family Income and Qualifying Income

Housing affordability2 increased from a year ago in all four regions. The Midwest had the biggest gain of 8.1% followed by the South with an incline of 7.4%. The Northeast had an incline of 7.2% followed by the West with the smallest increase of 6.0%.

Affordability is down in all four regions from last. The West had the largest decline of 5.8% followed by the South with a dip of 5.6%. The Midwest had a drop of 3.8% followed by the South had the smallest reduction of 0.9%.

Nationally, mortgage rates were down 62 basis points from one year ago (one percentage point equals 100 basis points). The median sales price for a single-family home sold in June in the US was $298,600 up 3.5% from a year ago, while median family incomes rose 3.4 % in 2020 from one year ago.

Bar chart: June Housing Affordability 2020 and 2019

With lower mortgage rates compared to one year ago, the payment as a percentage of income fell to 15.3% this June from 16.5% from a year ago. Regionally, the West has the highest mortgage payment to income share at 20.9% of income. The Northeast had the second highest share at 15.0% followed by the South with their share at 14.7%. The Midwest had the lowest mortgage payment as a percentage of income at 12.4%. Mortgage payments are not burdensome if they are no more than 25% of income.3

Bar chart: Mortgage Payment as Percent of Income, June 2020 and June 2019

Last week the MBA reported mortgage applications decreased 5.1% compared to the week prior. Refinance applications decreased 63.9% from the previous week. Mortgage credit availability increased in July. With the spike in sales, demand for housing remains strong. Incomes and home prices are moving at a similar growth rate which should help buyers during this time. Mortgage rates are at record lows and potential home buyers can aim to have lower monthly payments.

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 percent down payment.

2 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 to 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).

3 Total housing costs that include mortgage payment, property taxes, maintenance, insurance, utilities are not considered burdensome if their combined cost does not exceed 30% of income.

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