Housing affordability improved modestly in third quarter: NAR

In the third quarter, mortgage rates fell from 4.08% to 3.71%, according to data from the National Association of Realtors

Housing affordability experienced improvement nationwide after months of struggling, according to the National Association of Realtors’ Housing Affordability Index released Thursday.

In the third quarter, the median price of a single-family home in the United States rose to $280,200 from $279,500. Nonetheless, mortgage rates fell from 4.08 percent to 3.71 percent while the percentage of a household income required for a mortgage fell from 16.5 percent to 15.6 percent. Median family income rose from $78,572 to $79,215.

The index, which first launched in 1970, utilizes a combination of median home prices, median family incomes and average mortgage interest rates to determine housing affordability. Based on NAR’s calculations, the affordability index clocked in at 159.8 points — 8 points higher than the previous quarter but lower than 167.1 points in 2016.

As a result, homebuyers can earn slightly less while still being able to afford a median-priced home. In the previous quarter, homebuyers needed to make at least $51,744 to afford a down payment and mortgage payments. In the third quarter, that number decreased to $49,584.

According to the NAR analysis, it remains unclear if the affordability uptick will last. While low mortgage rates and a strong economy are helping more people make the leap to homeownership, increased competition and limited inventory are also driving prices up.

Email Veronika Bondarenko