At the national level, housing affordability conditions improved in January 2020 compared to last a year ago and rose compared to December, according to NAR’s Housing Affordability Index. Median home prices rose 6.9 % in January from one year ago. The effective 30-year fixed mortgage rate1 dropped to 3.68% this January from 3.78% in December, mortgage rates are historically low compared to the year-ago level of 4.76%.

Bar chart: January Housing Affordability 2020 and 2019

As of January 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 220.4 (median family income of $78,378 is almost twice the qualifying income of $35,568). The least affordable region remained the West, where the index was 121.9 (median family income of $85,445 and the qualifying income of $70,080).  For comparison, the index was 177.3 in the South (median family income of $73,548 and the qualifying income of $41,472) and 165.3 in the Northeast (median family income of $91,219 with a qualifying income of $55,200).

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

Affordability is up in three of the four regions and is only down in the Northeast 1.1% down from last month. The South had the largest gain of 6.1% followed by the West with an increase of 5.3%. The Midwest had the smallest incline of 4.5%.

Nationally, mortgage rates were down 108 basis points from one year ago (one percentage point equals 100 basis points). The median sales price for a single-family home sold in January in the US was $268,600 up 6.9% from a year ago, while median family incomes rose 2.7 % in 2020 from one year ago.

Bar chart: US and Regional Incomes

With lower mortgage rates compared to one year ago, the payment as a percentage of income fell to 14.8% this January from 16.2% from a year ago. Regionally, the West has the highest mortgage payment to income share at 20.5% of income. The Northeast had the second highest share at 15.1% followed by the South with their share at 14.1%. The Midwest had the lowest mortgage payment as a percentage of income at 11.3%.

Bar chart: Payment as Percent of Income January 2019 to January 2020

This week the MBA reported mortgage applications increased 55.4% compared to last week. Current homeowners are taking advantage of lower rates and refinancing their mortgage to lower their monthly payments. First time home buyers can also benefit from historically low rates.

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

The Housing Affordability Index calculation assumes a 20% down payment and a 25% 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% more than the level of income needed pay the mortgage on a median-priced home, assuming a 20% down payment so that the monthly payment and interest will not exceed 25% of this level of income (qualifying income).



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