Home Affordability Hits Lowest Point since 1989

NAR: Housing affordability reached a 33-year low in June, according to NAR data – but an inventory increase and stabilizing mortgage rates may help.

WASHINGTON – The average monthly mortgage payment jumped 54% year-over-year in June, while median household income rose only 5.8%, according to the National Association of Realtors® (NAR)’ Housing Affordability Index. As home affordability weakened, the median home price shot to a record $413,800 in June, and NAR’s index fell to its lowest reading in 33 years.

“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” says NAR Chief Economist Lawrence Yun.

Housing affordability “dramatically tumbled” in the second quarter amid rising mortgage rates and climbing home prices, NAR data shows. Monthly mortgage payments on a typical existing single-family home surged by nearly a third compared to the first quarter of 2022, and by half compared to a year earlier.

The 30-year fixed-rate mortgage has nearly doubled in the past year, though they’ve stabilized somewhat this month.

Monthly mortgage costs

The average monthly mortgage payment rose to $1,944 in June from $1,265 a year earlier – a $679 difference, NAR notes.

The annual mortgage payment as a percentage of income rose to 25.4%, and most financial experts consider housing payments that exceed 25% of income to be unaffordable.

“Monthly mortgage payments have soared compared to last year, and rising home prices are not helping affordability conditions,” Michael Hyman, a research data specialist at NAR, notes on the association’s Economists’ Outlook blog. “One good sign for the housing market is a welcome increase in the supply of inventory. Another is that rates recently have cooled, slowing the pace of growing monthly mortgage payments.”

Housing affordability posted double-digit declines in June compared to a year ago in all four major regions of the U.S. The Midwest was the most affordable region, with a median household income of $90,650 but a qualifying income of $68,496 needed to buy a median-priced home in the area.

On the other hand, the least affordable region continues to be the West, where the median family income was $98,498 but a qualifying income of $141,552 was needed to purchase a median-priced home. It’s the fourth consecutive month the Western region posted a reading on NAR’s affordability index below 100, which means a family earning the median income in the region can’t afford a median-priced home.

Source: National Association of Realtors® (NAR)

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