At the national level, housing affordability improved in February, according to NAR's Housing Affordability Index. Affordability stayed above 100 for the third consecutive month, standing at 102.2. Higher median family incomes and lower mortgage rates impacted affordability in February, making it more affordable to purchase a home.
Compared to one year ago, affordability rose modestly in February as the monthly mortgage payment increased by 4.4% and median family income rose by 4.5%. Mortgage payments fell modestly due to lower mortgage rates in February, which were up six basis points from one year ago (one percentage point equals 100 basis points). Specifically, the effective 30-year fixed mortgage rate was 6.92% this February compared to 6.86% one year ago. The median existing-home sales price rose 3.7% ($402,500) compared to one year ago ($388,000).
Compared to the prior month, the monthly mortgage payment decreased by 0.1% while the median price of single-family homes rose by 1.1%. The monthly mortgage payment decreased by $2 from last month.
The national index is currently above 100, meaning the typical family earns more than the income needed 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.
Affordability increased in two of the four regions from last month. The Northeast region had an increase of 4.8%, followed by the West with an increase of 1.3%. The Midwest had a decline of 0.7%, followed by the South, which fell 0.1%.
The most affordable region was the Midwest, with an index value of 134.2 (median family income of $101,308 with the qualifying income of $75,504). The South was the second most affordable region, with an index of 104.9 (median family income of $96,751 and the qualifying income of $92,208).
The least affordable region remained the West, where the index was 71.2 (median family income of $112,549 and the qualifying income of $158,064). The Northeast was the second most unaffordable region with an index of 93.7 (median family income of $113,317 with a qualifying income of $120,912).
Compared to a year ago, housing affordability declined in two of the four regions. The Northeast region had the biggest dip of 7.1%, followed by the Midwest with a decrease of 1.9%. The South rose by 2.2%, followed by the West with the smallest gain of 0.3%.
Compared to one year ago, the monthly mortgage payment rose to $2,125 from $2,036, an increase of 4.4%. From a year ago, the monthly mortgage payment increased by $89. The annual mortgage payment as a percentage of income increased to 24.5% this February, the same as a year ago (24.5%).
Mortgage rates fell in February, moving back to the 6% range after going back up to 7% the previous month. Median family incomes are currently outpacing home price growth. Median home prices jumped back above $400,000 after falling below that threshold in January. This week, the Mortgage Bankers Association reported that mortgage applications increased 20.0% from one week prior. Mortgage credit availability also increased in March by 2.5%.
Regionally, the West has the highest mortgage payment-to-income share at 35.1% of income. The Northeast had the second highest share at 26.7%, followed by the South at 23.8%. The Midwest had the lowest mortgage payment as a percentage of income at 18.6%.
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.
