For the second month in a row, national housing affordability improved in August, according to the latest National Association of Realtors housing affordability index report.
This improvement came as monthly mortgage payments fell by 1.1% while median family income fell by 0.7%. As of August 2021, the 30-year fixed mortgage rate was 2.89% compared to 3% a year prior. Median existing home sales prices rose 15.6% in the same time period.
To calculate the housing affordability index, a 20% down payment and a 25% ratio of principal and interest payment to income, is assumed. Index values over 100 indicated that a family with the median income had more than the income required to afford a median-priced home.
Contributing to the increase in affordability are low mortgage rates, which have fallen for back-to-back months and the seasonal slowing of home price growth.
Despite rising to 151.3 in August from a low of 146.5 in June 2021, the housing affordability index is still well below its August 2020 level of 165.8.
How Freddie Mac is addressing affordable housing challenges
As part of Freddie Mac’s mission to provide liquidity, stability, affordability and equality to the housing market, Freddie Mac created its Housing Solutions team in 2020 to reduce barriers to homeownership and provide solutions to some of the nation’s toughest housing challenges.
Presented by: Freddie Mac
The most affordable region was the Midwest with an index value of 196.8, followed by the South with an index value of 160.6 and the Northeast at 149.1. The least affordable region was the West with a housing index value of 114.9.
These index values are all still below where they were a year ago, with the Northeast recording the largest decline at 10.7% and the Midwest showing the smallest at 4.8%, according to the report. However, all regions besides the West, which remains unchanged, showed a month-over-month increase in August.
The report found that monthly mortgage payments rose to $1,210 in August 2021, from $1,062 a year prior, a 13.9% increase. Nationally this meant that the annual mortgage payment as a percentage of income increase to 16.5% from 15.1%.
Regionally, the West had the highest mortgage payment to income share at 21.8% of income and the Midwest had the lowest at 12.7%, according to the report. Mortgage payments are considered burdensome if they are more than a quarter of the family income.
The post Housing affordability improves for second straight month appeared first on HousingWire.