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%.
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).
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.
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
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.