It takes 23.6% of median income to make the monthly payment on the average-priced home.

In it’s latest report, the Black Knight Mortgage Monitor confuses affordability with payment stress and fails to make an apples-to-apples comparison when determining homes are “more affordable” today than in the period 1995-2003.

Nonetheless, the report is interesting for what it does show. I am passing on a number of suggestion to them as to how to make the report better.

Mortgage Monitor Bullet Points

  • It now takes 23.6% of median income to make the monthly payment on the average-priced home, making housing the least affordable it’s been in nearly a decade.
  • The monthly principal and interest payment needed to purchase the average-priced home has seen a $190 per month increase since the beginning of 2018, an 18% jump.
  • Despite the recent tightening, housing on average across the U.S. remains more affordable than the long-term benchmark (1995–2003) of 25.1%.
  • Even if home prices were to stay flat, another 0.50% increase in interest rates would make homes less affordable than long term norms.

    • California Least Affordable

  • California is the least affordable state in which to live, requiring 39% of the median income in the state to purchase the average-priced home.
  • Even more noteworthy is the increasing delta between affordability today and California’s own long-term averages.
  • It currently requires 7.5% more of the median income to purchase the average-priced California home today (39.3% vs. 31.8%) that it did from 1995-2003.
  • While that payment-to-income ratio is still far more affordable than the 59% peak in 2006, symptoms of California’s tight affordability environment appear to be emerging.

    • Affordability Today vs Historical Average

  • 7 of the 10 states that are now less affordable than long-term averages have seen their rate of home price growth slow over the past six months.
  • At the start of 2018, just two states – California and Hawaii – were less affordable than their long-term norms.
  • As of today, 10 states have passed those benchmarks and another six are within 1.0% of long-term affordability levels.
  • Hawaii is the least affordable state compared to long-term norms, requiring nearly 8% more of median income to make the payment on the average home than long-term averages.
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