16%: The average mortgage payment on the median priced home in August as a share of the median income, according to data compiled by the National Association of Realtors.
Housing affordability hit a four-year low in August amid steady gains in home prices during the spring and higher interest rates during the summer.
While the data released earlier this week show affordability has been dented, homes are still more affordable than any time between 1989 and late 2008, according to the NAR’s figures.
At prevailing interest rates in August, the mortgage payment on the median priced home stood at $851, or around 16% of the median U.S. income. By contrast, the equivalent mortgage payment one year earlier, at $683, accounted for 13.3% of the median income.
The NAR data isn’t adjusted for seasonal factors. Median home prices tend to peak in June, when there are more home transactions, particularly at the more expensive end of the market. Because the affordability figures are pegged to median home prices, the data typically show housing becoming more affordable during the winter and less affordable in the summer.
But the affordability figures show unmistakable evidence of how rising interest rates hurt housing affordability in July and August because median prices didn’t rise in those months, even as the average monthly payment went up due to rising rates. The average monthly payment rose from $787 in June to $851 in August — even though median prices fell slightly from June to August.
Monthly payments last stood above $850 in November 2008, and monthly payments as a share of income last stood at 16% in July 2009.
Mortgage rates have declined modestly since August, which means that the 16% figure could be — for this year, at least—the high watermark for the payment-as-a-share-of-income metric.
Declining affordability is a big reason why the housing market’s frenzied price gains during the first half of the year are likely to cool during the second half. Home sales data for September won’t be released until Oct. 21, but already there are more signs that competition for homes has eased as buyers digest the impact of higher rates.
by Nick Timiraos