At the national level, housing affordability conditions improved in December 2019 compared to a year ago and fell modestly compared to November, according to NAR’s Housing Affordability Index. Median home prices rose 8.0 % in December from one year ago. The effective 30-year fixed mortgage rate1 also rose to 3.78% this December from 3.75% in November although this mortgage rate is still lower compared to the year-ago level of 4.99%.

Bar chart: December Housing Affordability in 2019 and 2018

As of December 2019, 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 211.5 (median family income of $78,785 is almost twice the qualifying income of $37,248). The least affordable region remained the West, where the index was 116.1 (median family income of $85,720 and the qualifying income of $73,824).  For comparison, the index was 165.6 in the South (median family income of $72,900 and the qualifying income of $44,106) and 165.9 in the Northeast (median family income of $90,618 with a qualifying income of $54,624).

Housing affordability2[> increased from a year ago in all four regions.[>

However, with home prices rising faster than income, affordability is down from last month in two of the four regions.

Nationally, mortgage rates were down 121 basis points from one year ago (one percentage point equals 100 basis points). The median sales price for a single-family home sold in December in the US was $277,000, up 8.0% from a year ago, while median family incomes rose 3.3 % in 2019 from one year ago.

Bar chart: U.S. and Regional Incomes 2019 and 2018

With lower mortgage rates compared to one year ago, the payment as a percentage of income fell to 15.5% this November from 17.1% a year ago. Regionally, the West has the highest mortgage payment to income share at 21.5% of income. The Northeast and the South had the second highest share at 15.1%. The Midwest had the lowest mortgage payment as a percentage of income at 11.8%.

Line graph: Payment as a Percent of Income December 2018 to December 2019

This week the MBA reported mortgage applications increased 1.1% compared to last week for the third straight week. There is still a housing shortage and more inventory is needed for potential home buyers. Mortgage rates are still historically low.

What does housing affordability look like in your market? View the full data release.

The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation.


1 Starting in May 2019, FHFA discontinued the release of several mortgage rates and only published an adjustable-rate mortgage called PMMS+ based on Freddie Mac Primary Mortgage Market Survey.  With these changes, NAR discontinued the release of the HAI Composite Index (based on 30-year fixed-rate and ARM) and starting in May 2019 only releases the HAI based on a 30-year mortgage. NAR calculates the 30-year effective fixed rate based on Freddie Mac’s 30-year fixed mortgage contract rate, 30-year fixed mortgage points and fees, and a median loan value based on the NAR median price and a 20% down payment.

2 A Home Affordability Index (HAI) value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).



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