At the national level, housing affordability declined in May compared to the previous month, according to NAR’s Housing Affordability Index. Compared to the prior month, the monthly mortgage payment increased by 3.7%, while the median price of single-family homes inclined 2.8%. The monthly mortgage payment increased by $73 from last month.

Compared to one year ago, affordability fell in March as the monthly mortgage payment climbed by 9.9% and median family income rose by 4.8%. The effective 30-year fixed mortgage rate was 6.51% this March compared to 5.31% one year ago, and the median existing-home sales price fell 3.4% from one year ago.

As of March 2023, the national index fell below 100, which means that the typical family cannot afford to buy based on the median-priced home. An index below 100 means that a family with a median income had less than the income required to afford a median-priced home. The income required to afford a mortgage, or the qualifying income, is the income needed so that mortgage payments on a 30-year fixed mortgage loan with a 20% down payment account for 25% of family income. The most affordable region was the Midwest, with an index value of 122.7 (median family income of $89,814 with a qualifying income of $73,200). The least affordable region remained the West, where the index was 67.1 (median family income of $99,846 and the qualifying income of $148,704). The Northeast was the second most affordable region with an index of 95.8 (median family income of $103,652 and the qualifying income of $108,192). The South was the second most unaffordable region with an index of 93.6 (median family income of $83,791 with a qualifying income of $89,568).

A mortgage is affordable if the mortgage payment (principal and interest) amounts to 25% or less of the family’s income.

Housing affordability had double-digit declines from a year ago in only the Northeast region. The Northeast had the biggest decline of 10.1%, followed by the Midwest, with a dip of 8.8%. The South experienced a weakening in price growth of 4.9%, followed by the West, which fell 2.0%.

Affordability was down in all four regions from last month. The Midwest region had the biggest drop of 4.7%, followed by the Northeast with a decline of 4.4%. The West decreased 4.3%, followed by the South region had the smallest decline of 3.0%.

Nationally, mortgage rates were up 120 basis points from one year ago (one percentage point equals 100 basis points) from 5.31 to 6.51%.

Compared to one year ago, the monthly mortgage payment rose to $2,030 from $1,847, an increase of 9.9% or $183. The annual mortgage payment as a percentage of income inclined to 26.7% this May from 25.4% a year ago. Regionally, the West has the highest mortgage payment to income share at 37.2% of income. The South had the second highest share at 26.7%, followed by the Northeast, with their share at 26.1%. The Midwest had the lowest mortgage payment as a percentage of income at 20.4%. Mortgage payments are not burdensome if they are no more than 25% of income.

This week, The Mortgage Bankers Association released data showing mortgage applications increased 0.9% from one week earlier. While applications increased, they are still currently at a low level. Qualifying incomes have outpaced median family incomes making affordability conditions increasingly difficult. Low inventory is pushing home prices back up, which is also creating challenges for potential home buyers.

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Some of this content was generated by the National Association of Realtors.