May 2016 Housing Affordability Index

At the national level, housing affordability is down from a year ago as higher home prices cause a slip in affordability. Median family incomes are not rising at the pace of home prices however, historically lower rates provide opportunities for potential home owners.

• Housing affordability declined from a year ago in May pushing the index from 161.2 to 158.8. The median sales price for a single family home sold in May in the US was $241,000 up 4.6 percent from a year ago.
• Nationally, mortgage rates were down 7 basis points from one year ago (one percentage point equals 100 basis points) while incomes modestly rose approximately 2.1 percent.
• Regionally, all regions saw declines in affordability from a year ago except the Northeast. The Northeast had an increase of 3.5 percent because it saw a slight decline in home prices. The South had the largest decline in affordability of 3.0 percent. The West had a decline in the affordability index of 2.6 percent followed by the Midwest with 2.4 percent.
• The West had the biggest increase in price at 6.8 percent. The South had an increase of 5.9 percent while the Midwest had a 4.7 percent gain in price. The Northeast had a decline of 0.5 percent.
• By region, affordability is down in all regions from last month. The Midwest (4.3 percent) had the biggest decline. The South and West had a decline of 3.8 percent and 2.5 percent. The Northeast had the smallest decline in affordability of 0.5 percent.
• Despite month to month changes, the most affordable region is the Midwest where the index is 197.6. The least affordable region remains the West where the index is 116.7.  For comparison, the index is 162.7 in the South, 164.2 in the Northeast.
• Currently mortgage applications are up and rates have remained low. Inventory has not picked up and is having an impact on escalated home prices across many metro markets. Home owners are benefiting from equity gains, but renters hoping to get into the housing market are challenged by rising house prices and rising rents. Job gains have been stronger lately, but incomes are not keeping pace with rising home prices. Lending standards are easing helping some first time buyers to enter the housing market.
• 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 (principle and interest payment to income). See further details on the methodology and assumptions behind the calculation here.