NAR: Housing Affordability Improved In August

Housing affordability improved in August for the second straight month, according to the National Association of Realtors (NAR) housing affordability index report.

Month-over-month, mortgage payments fell by only 1.1%, while median family income fell by 0.7%. The index hit a low of 146.5 in June but rose to 151.3 in August.

But affordability declined year-over-year (YOY), with monthly mortgage payments rising 13.9% to $1,210 from August 2020. Median family income rose only 3.9%.

The effective 30-year fixed mortgage rate was 2.89% in August compared to 3% a year ago. The median existing-home sales price rose 15.6% YOY.

Home prices are in a seasonal cool-down, which could account for the numbers. But consumer sentiment on home buying continues to trend downward, and industry experts have warned that real improvement isn’t likely anytime soon.

“We continue to see prospective buyers making above-list price offers on homes given the ultra-competitive market environment, and if the supply shortage holds through the winter, we could expect to see additional rapid price growth in spring 2022, but at a lower rate compared to 2021,” said Jeremy Sicklick, Co-Founder and Chief Executive Officer of HouseCanary.

HouseCanary’s latest Market Pulse report underscored the shortage of homes with selling prices under $200 thousand. While net new listing activity is up in other pricing categories, it’s down 30% for these homes from the same time last year. 

Washington is trying to mitigate the lack of housing under $200k by expanding affordable housing programs. Freddie Mac announced plans to offer at least $3 billion in Single-Family affordable housing bonds, intended to boost homeownership in low-income markets.

NAR’s report found the most affordable region was the Midwest, at an index value of 196.8, followed by the South (160.6) and the Northeast (149.1). The West was the most expensive at 114.9.

The Northeast had the most significant decline, 10.7%, while the Midwest had the smallest, 4.8%.