A Brief Review of Mortgage Affordability

A lot of people are naturally talking about mortgage affordability these days. That is understandable. The mortgage payment for the average buyer of the average hypothetical home has risen substantially. This has reversed a little bit recently, because of a breather in both the trend of rising home prices and rising mortgage rates. But, I think focusing on this measure is not a useful way to try to understand housing market trends.

First, here is a chart from “Building from the Ground Up”, showing the average mortgage affordability (the % of income required for a mortgage payment) over time for a typical city with above-average income and one with below-average income. This, of course, doesn’t include the recent period with higher rates.