Economists' Outlook

Housing stats and analysis from NAR's research experts.

November 2015 Housing Affordability Index

In spite of higher prices, housing affordability is down only slightly from a year ago as lower mortgage rates and higher incomes almost offset higher home prices.

  • Housing affordability declined slightly (2.6 percent), from a year ago in November in spite of a notable increase in prices. The median sales price for a single family home sold in November in the US was $221,600, up 6.6 percent from a year ago. This pushed the affordability index from 171.9 to 167.4.
  • Growing incomes and easing mortgage rates from a year ago helped to nearly offset the increase in home prices. Nationally, mortgage rates were down 15 basis points from one year ago (one percentage point equals 100 basis points) while incomes rose 2 percent. The reduction in mortgage rates from one year ago saves the median home buyer $16 per month on principal and interest payments at the current home price while income growth means the median family earns $111 more per month than November 2014.
  • Regionally, all four regions saw declines in affordability from a year ago. The West had the biggest decline in the affordability index of 2.9 percent followed by the Midwest and South. The affordability index in the Northeast slipped only 0.4 percent from one year ago.
  • Price movements were the biggest driver of affordability changes. The West had the biggest increase in price at 8.6 percent while the Northeast experienced the slowest price growth at 3.6 percent. The Midwest and the South fell in between with 5.2 percent and 6.5 percent, increase in home prices, respectively.
  • Seasonal fluctuations in price tend to drive month to month changes in affordability, but in November, a slight decrease in mortgage rates in most regions also had a role. Affordability is up 0.4 percent from one month ago in the US and increased slightly in the Midwest (1.4 percent) and West (1.8 percent). Affordability decreased slightly in the Northeast (1.9 percent) and South (0.1 percent).
  • Despite month to month changes, the most affordable region is the Midwest where the index is 213.7. This means that in the Midwest in November 2015, the median income family earned roughly 2.1 times the income that would be needed to qualify to purchase the median-priced home that sold in the same month. For comparison, the index is 176.1 in the South, 166.6 in the Northeast, and 121.6 in the West.
  • While the affordability index indicates that the median-priced home is affordable to the median family across the US, there is some room for concern. Price increases are great for owners who build up equity to use in subsequent home purchases, but rising rents make it difficult for potential new buyers to save for a down payment. Lending options from the Federal Housing Agency (FHA) and the Government Sponsored Enterprises (GSEs) enable would-be homeowners to make a home purchase with down payments as low as 3 to 3.5 percent, but many potential buyers are unaware of these programs. Realtors can play a valuable role in advising and educating potential clients about the options that are available to them.
  • 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.

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