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Home Affordability Dropped Slightly in July

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Affordability

Home Affordability Dropped Slightly in July


September 15, 2020
Keys opening door to new home
Photo: 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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