According to the National Association of Realtors (NAR), the Housing Affordability Index (HAI) for June fell to 98.5 — the lowest since June 1989, when the HAI was 98.3. This marked the ninth straight month of declines and the first time this year the HAI fell below 100. In addition, June’s HAI was less than May’s index of 102.2 and far short of the June 2021 index, when it was 143.1.
The NAR determines affordability by “whether or not a typical family earns enough income to qualify for a mortgage loan in a typical home at the national level and regional levels based on the most recent price and income data,” according to its website.
One of the factors that contributed to the lower HAI in June was rising home sale prices. The sales price for existing homes in June was $423,300 — marking five straight months of increases and the highest sales price in 2022, according to the NAR. Further, the mortgage rate for that month was 5.60%, also a year high, based on data from the Federal Housing Finance Agency.
June’s median family income was also at its highest level in 2022 at $91,952, according to the NAR; however, the monthly mortgage payment (principal plus interest) was $1,944 — also a record for this year. As a result, homeowners had to pay the most this year for their homes, with 25.4% of their income going to pay the mortgage. The NAR said homebuyers would need a qualifying income of $93,312 a year to qualify for a mortgage. (For a qualifying income, that includes the 20% down payment and mortgage payments cannot exceed 25% of their gross monthly income.) An HAI above 100 is achieved when a family earns more than enough money to buy a median-priced home and is able to cover the 20% down payment. Statistics from the NAR show that, since last June, the median family income rose by 5.8%, but the monthly mortgage payments increased by a stunning 53.7%, easily outpacing income growth. An article in The Wall Street Journal noted that housing could be less affordable in the months to come, thanks to the Federal Reserve’s aggressive interest rate hikes, which have bulked up mortgage rates and made the cost of borrowing even more expensive, and the slowdown in new-home construction, meaning a shrinking inventory.
