National median incomes fail to keep pace with home values

Housing affordability fell in October despite mortgage rates being at a historical low, according to the latest National Association of Realtors’ Housing Affordability Index. However, the NAR said that housing affordability conditions have nonetheless improved from a year ago.

The issue is that home prices are rising faster than incomes, leading to houses becoming less affordable in October compared to the previous month in all four major U.S. regions, the NAR said in its Economists’ Outlook blog.

The median sales price for a single-family home sold in the U.S. in October came to $273,600, up 6.2% from a year ago. In contrast, median family incomes in the U.S. rose by just 3.3%, the NAR said.

Still, with lower mortgage rates—down 114 basis points from one year ago and averaging 3.74% in October—the payment as a percentage of income dropped to 15.3% in October compared to 17% a year ago, NAR reports. The West has the highest mortgage payment-to-income share at 21.7% of income, the South at 14.8%, the Northeast at 14.7%, and the Midwest had the lowest mortgage payment as percentage of income at 12%.

The most affordable region in the U.S. in October was in the Midwest. The median family income of $78,249 in the Midwest is nearly twice the qualifying income of $37,584 (the qualifying income is the income needed so that mortgage payments comprise no more than 25% of a family’s income). On the other hand, the West remained the least affordable region in the nation. The median family income there of $85,136 is 1.15 times the qualifying income of $73,728.