The typical American family could more easily afford a home at the national median sales prices in the fourth quarter than at any time in the past year, according to the latest data released Wednesday by the National Association of Realtors (NAR).
NAR’s affordability index climbed to 162.9 in the fourth quarter, up from 159.9 in the third quarter of 2019 and 145.7 in the fourth quarter of 2018.
The index measures whether or not the typical family – defined as one earning the median family income as reported by the U.S. Census Bureau — could afford a typical home, which is defined as the national median-priced existing single-family home.
A value of 100 means that the typical family has enough income to qualify for a mortgage on a median-priced home, assuming a 20 percent downpayment and that the payment to income ratio cannot exceed 25 percent of the median family income.
The increase in affordability was likely due to mortgage rates still sitting at historic lows. The average rate for the 30-year mortgage in the fourth quarter of 2019 was 3.76, while the median family income was $79,740 and the median existing single-family home price was $275,000.