Housing Affordability Declines Nearly 23 Percent In Less Than a Year

April 15, 2022

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1:30 pm

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*Housing affordability index courtesy of the NAR via St. Louis Fed*

Starting March of 2021, the National Association of Realtors (NAR) made Housing Affordability Data available to the St. Louis Fed.

What Does Affordable Mean?

The NAR defines affordable as the degree to which a typical family can afford the monthly mortgage payments on a typical home.

It uses median household income, median home, and mortgage rates as factors in its calculation.

Here is a link to the precise affordability calculation.

Affordability Details

Compared to the prior month, the monthly mortgage payment increased by 6.1% while the median family income rose modestly by 0.4%.
Compared to one year ago, affordability declined in February as the monthly mortgage payment increased by 30.4% and median family income rose by 3.6%.
The effective 30-year fixed mortgage rate1 was 3.83% this February compared to 2.86% one year ago
The median existing-home sales price rose 15.5% from one year ago.

I note that compared to March of 2021, the affordability index declined 39.8 points from 170.4 to 135.4.

That’s a decline of 22.7%.

I do not have access to data that goes back further but I got this post idea from a Tweet by Charlie Bilello.

Lowest Level Since 2008

The US Housing Affordability Index has moved down to its lowest level since 2008. This is based on February data when mortgage rates were over 1% lower than they are today. The result: current affordability is much lower, plummeting over the last 2 months.

Charting via @ycharts pic.twitter.com/o2ySiv0hsr

— Charlie Bilello (@charliebilello) April 14, 2022

“The US Housing Affordability Index has moved down to its lowest level since 2008. This is based on February data when mortgage rates were over 1% lower than they are today. The result: current affordability is much lower, plummeting over the last 2 months.”

Inflation Has Eaten Up Nearly 100 Percent of Hourly Wage Gains Since 1973

Accounting for CPI inflation, wages for production and nonsupervisory workers is nearly the same today as February of 1973.

For details, please see Inflation Has Eaten Up Nearly 100 Percent of Hourly Wage Gains Since 1973.

Mortgage rates are now above 5 percent and inflation jumped again in March. Expect another big decline in affordability next month.

People get about 25% less house than a year ago on a mortgage payment basis.

Affordability is certainly way down and falling, but I would prefer a measure that looks at resales of the same home vs median price for a more accurate comparison.

Regardless, many people who were trying to buy a few months ago are now out of the bidding, priced out.

This post originated at MishTalk.Com.

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21 Comments

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david halte

2 years ago

The institute that generated unaffordable housing, promotes a financial scheme for 40-year mortgages. Philadelphia Fed President Patrick Harker believes that a 40-year mortgage can assist with the large number of Americans who have the potential to be behind on their mortgage payments.

Last June, Ginnie Mae, the Department of Veterans Affairs, and U.S. Department of Agriculture announced it would start supporting the securitization of existing mortgages, modified by the lender, into 40-year loans to reduce the size of monthly payments.

Most individuals aren’t employed for 40 years. This plot relies on SS or pensions for the final years of payments. And whatever host of other adverse consequences

FooFooFed

2 years ago

Chris WHALEN says 6.5 to 7% on the 30yr mortgage coming up. That ought to fix things. LOL

Mr. Purple

2 years ago

Let’s see if rising mortgage interest rates temper appreciation. Assuming rates are cyclical, the best time to buy is when rates are high and values are low, refinancing when rates inevitably drop.

KidHorn

2 years ago

Reply to Mr. Purple

yes

Webej

2 years ago

Sooner or later, the entire housing stock will be owned by Blackrock et al.

They will be free to release housing units for rent as they please, hoarding units to set pricing.

After all, all that money that has flooded the system the past decades has to go somewhere.

KidHorn

2 years ago

Reply to Webej

And since they pay cash, higher interest rates will benefit them.

strataland

2 years ago

This topic led to an interesting observation. Most of my peers (like almost all of them) could not afford the house they live in at its current value and current mortgage rates.

AWC

2 years ago

So, affordability is low, and prices and sales are up. What a “Market?”

Such is life in a centrally planned and controlled economy.

Maximus_Minimus

2 years ago

Reply to AWC

Hardly centrally planned. What you see is a dysfunctional market economy kept afloat by arbitrary, haphazard government interventions.

FooFooFed

2 years ago

ALSO the Cap on SALT provision at 10k adds extra salt(pun) into the open wound. No matter if your in red or blue states… since pricing has gone up anyone with mortgage interest deduction and high property tax can’t get what everyone before 2018 got. So add that to the absurd price of a house. A 1000 (one thousand) sq/ft house sold in my area for 1 million!! What I want to know is…… how has Private Equity pushed up prices as well as Zillow buying? Are they able to write off property tax and mortgage interest on their balance sheets?? glad I aint young!!!

TexasTim65

2 years ago

Reply to FooFooFed

Investment homes write off in different ways (improvements, repairs etc).

KidHorn

2 years ago

Reply to FooFooFed

I never understood why mortgage interest was deductible while every other interest wasn’t. Obviously it was implemented to increase home sales. But, why only homes? Wouldn’t deducting car interest do the same for cars?

Mr. Purple

2 years ago

Reply to KidHorn

It certainly is inconsistent, anti-free market and biased but as a mortgagee I am very pleased with the policy.

StukiMoi

2 years ago

Reply to KidHorn

“But, why only homes? Wouldn’t deducting car interest do the same for cars?”

Competition would ensure that greater demand for cars, would result in more, and better, cars being built and sold. People wouldn’t simply keep buying the same old 50s clunker for more and more money the rustier it got.

Building better cars, then selling them, in a competitive market, requires competent people. Competition will force most of the money spent on cars to go to those competent enough to build something offering good price/performance. Noone would buy the non-running junk, which is the best the half literates laying about “Wall Street” collecting loot from The Fed, could hope to put together.

Handing free money to car buyers, would thus fly in the face of The Fed’s mandate to transfer wealth FROM competent people, to incompetent deadweights who are wholly dependent on The Fed for all their wealth and privileges.

Houses, OTOH, don’t get better as a result of greater demand. The stupid people living solely off of Fed theft, have long since thoroughly banned anything even approaching competent people from competing against the decaying shacks that the stupid people now “own.” That way, the idiot dumb enough to pay $300K for a $50K shack 5 years ago, can now preen around pretending to have “done the right thing,” by now selling what has now decayed into a $40K shack, for $600K. All because totalitarian government bans more competent people from competing with the junk that the idiot has to sell.

Hence, nominally handing money to “home” buyers, is a much cleaner and more direct way of redistributing wealth to stupid deadweights, than what any even remotely competitive market, like cars, would allow. Which is why supporting the “home” rackets, is what The Fed, along with idiots on Fed welfare, thus favors.

Also: Allowing mortgage rate deductions doesn’t make homes more affordable. It just makes DEBT to buy homes with more affordable. So, people don’t get more homes. They just more debt, for the same home. Debt being, after all, what The Fed’s favored-over-all clients benefit the most from others being stuck with more of.

Lisa_Hooker

2 years ago

Reply to KidHorn

It was done to tie folks to the land, reduce mobility, and better manage the geographic pools of labor.

vanderlyn

2 years ago

Reply to Lisa_Hooker

bingo. winner of why we indebt the serfs and keep em close to the plantations. you are wise lisa. anthropology wisdom you have.

QTPie

2 years ago

Due to the record run up in rates this data is already outdated… 30-year mortgage rates have moved up over 1% since February. This will tank affordability significantly lower.

StukiMoi

2 years ago

You know you live in one of history’s truly tragic dumps, when “affordability” of something as trivial and simple to obtain as a pair of tennis socks has, solely on account of the population being literally flat out retarded, become, of all things, hard. A “home” was a solved problem hundreds of years ago.

Bears, dogs, frogs…. literally any being, aside from that absolute nadir of lifeforms which are indoctrinated progressives, have solved that problem. To the point where it’s not even a problem at all anymore.

Yet, in this abject retard colony; where noone can read nor count nor anything else; it’s, like, a big deal. Which “we the stupid, useless and worthless” must then “debate” and “deem” and “hold” and “judge” and “find” and babble more trivially obvious, childish nonsense about….

For those of us even a tiny bit higher up the evolutionary ladder, it’s honestly flat out insulting having to even share planets with that kind of absolute garbage.

vanderlyn

2 years ago

Reply to StukiMoi

ha ha ha

Tony Bennett

2 years ago

Bonds getting mauled again … when mortgage rates reset today very likely a 52 week high* … which would make it high since 2009.

*30yr mortgage

Tony Bennett

2 years ago

I must say … the view from my seat in the coaster … spectacular …

Housing Affordability Declines Nearly 23 Percent In Less Than a Year

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