Home Affordability Dropped Slightly in July

September 15, 2020
Keys opening home
By MyCreative

The National Association of Realtors reports that the median household income increased in July, but median home prices advanced at a higher rate. The comparison of household income and home prices determines the affordability of housing. As median household income rose by 4.1% in July, the median home price increased by 8.5%, which decreases housing affordability. Still though, the drop in affordability in July did not make a large impact. Homes are still generally affordable compared to average household incomes. But location makes a difference. Regionally, the Midwest is the most affordable and the West is the least affordable.

As of July 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 199.8 (median family income of $80,742 which is almost more than twice the qualifying income of $40,416). The least affordable region remained the West, where the index was 116.6 (median family income of $88,022 and the qualifying income of $75,504). For comparison, the index was 168.1 in the South (median family income of $75,767 and the qualifying income of $45,072) and 181.1 in the Northeast (median family income of $93,970 with a qualifying income of $51,888).

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