NAR released a summary of pending home sales data showing that December’s pending home sales pace was down 2.2 percent last month and fell 9.8 percent from a year ago.
Pending sales represent homes that have a signed contract to purchase on them but have yet to close. They tend to lead existing-home sales data by 1 to 2 months.
All four regions showed declines from a year ago. The South had the biggest drop in sales of 13.5 percent. The West fell 10.8 percent followed by the Midwest with a decline of 7.2 percent. The Northeast had the smallest dip in sales of 2.5 percent.
From last month, three of the four regions showed declines in contract signings. The South region had the biggest drop of 5.0 percent. The Northeast fell 2.0 percent followed by the Midwest with a dip of 0.6 percent. The only region with an incline in contract signings was the West, which had a gain of 1.7 percent.
The U.S. pending home sales index level for the month was 99.0. November’s data was revised up to 101.2.
December’s decline was the pending index’s first drop below the 100 mark after 55 consecutive months over the 100 level.
The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.
NAR released a summary of existing-home sales data showing that housing market activity this December, fell after two straight months of gains and was down 6.4 percent from November. Sales of existing-homes dropped 10.3 percent from December 2017. December’s existing-home sales reached a 4.99 million seasonally adjusted annual rate.
The national median existing-home price for all housing types was $253,600 in December, up 2.9 percent from a year ago. This marks the 82nd consecutive month of year-over-year gains.
Regionally, three of the four regions showed growth in prices from a year ago, with the Midwest remaining flat. The Northeast had largest gain of 8.2 percent followed by the South with a gain of 2.5 percent. The West had a modest gain of 0.2 percent from December 2017.
December’s inventory figures are down from last month 10.9 percent to 1.55 million homes for sale. Compared with December of 2017, there was a 6.2 percent increase in inventory levels. It will take 3.7 months to move the current level of inventory at the current sales pace. It takes approximately 46 days for a home to go from listing to a contract in the current housing market, up from 40 days a year ago.
From November 2018, the Midwest experienced the largest decline in sales of 11.2 percent. The Northeast had a decline of 6.8 percent followed by the South with a dip of 5.4 percent. The West had the smallest decline of 1.9 percent.
All four regions showed declines in sales from a year ago. The West had the biggest drop in sales of 15.0 percent. The Midwest had a decline of 10.5 percent followed by the South with a drop of 8.7 percent. The Northeast had the smallest drop in sales of 6.8 percent. The South led all regions in percentage of national sales, accounting for 41.9 percent of the total, while the Northeast had the smallest share at 13.8 percent.
In December, single-family sales were down 5.5 percent and condominiums sales were down 12.9 percent compared to last month. Single-family home sales fell 10.1 percent and condominium sales were down 11.5 compared to a year ago. Single-family homes had an increase in price up 2.9 percent at $255,200 and condominiums rose 2.3 percent at $240,600 from December 2017.
At the national level, housing affordability is down from last month and down from a year ago. Mortgage rates rose to 4.99 percent this November, up 19.1 percent compared to 4.19 percent a year ago.
Housing affordability declined from a year ago in November moving the index down 10.6 percent from 161.0 to 144.0. The median sales price for a single family home sold in November in the US was $260,500 up 5.0 percent from a year ago.
Nationally, mortgage rates were up 80 basis point from one year ago (one percentage point equals 100 basis points).
The payment as a percentage of income was up from last month at 17.4 percent this November and up from 15.5 percent from a year ago. Regionally, the West has the highest payment at 23.8 percent of income. The Northeast had the second highest payment at 17.1 percent followed by the South at 16.8 percent. The Midwest had the lowest payment as a percentage of income at 13.7 percent.
Regionally, the Northeast recorded the biggest increase in home prices at 8.2 percent. The South had an increase of 3.8 percent while the West had a gain of 2.4 percent. The Midwest had the smallest growth in price of 1.6 percent.
Regionally, all four regions saw a decline in affordability from a year ago. The Northeast had the biggest drop in affordability of 14.4 percent. The South had a decline of 9.3 percent followed by the Midwest that fell 9.2 percent. The West had the smallest drop of 7.2 percent.
On a monthly basis, affordability is down from last month in all of the four regions. The Northeast region had the decline of 5.5 percent. The South had a decline of 2.0 percent followed by the Midwest with a dip of 1.8 percent. The West had the smallest dip in affordability of 0.7 percent.
Despite month-to-month changes, the most affordable region was the Midwest, with an index value of 181.9. The least affordable region remained the West where the index was 105.0. For comparison, the index was 148.8 in the South, and 146.4 in the Northeast.
Mortgage applications are currently up while credit availability is down. Rates are higher this month but are still historically low. Home prices are up 5.0 percent while median family incomes that are growing 3.0 percent. The job market is steady. More inventory is welcome on the lower end of the market whereas there is more supply of inventory for high priced homes.
What does housing affordability look like in your market? View the full data release here.
The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.
Home price appreciation is an important topic in today’s economy. Using data from the American Community Survey (ACS), we can analyze the gains and losses of property values over time. I estimated the median property values by state in 2018 using the FHFA index and the median property values from the (ACS). I then calculated the growth rate from 2005 -2018. 
The states with the highest estimated median property values in 2018 are The District of Columbia ($677,473), Hawaii ($649,272), California ($566,311), Massachusetts ($428,161) and Washington ($384,740).
The states with the lowest estimated median property values in 2018 are Alabama ($148,827), Oklahoma ($139,385), Arkansas ($135,733), Mississippi ($123,586) and West Virginia ($120,720).
On a regional level, the estimated price growth appears to be the strongest in the South, West, and Midwest. Price growth is weakest in the Northeast states. Overall, all regions are displaying strong to moderate growth in property values. Below is a breakdown of the Census four regions by state.
In the South, which typically leads all regions in sales, The District of Columbia led the region with 76 percent estimated price growth from 2005 to 2018. Maryland experienced 1 percent annual price growth and since 2005, home prices have grown 21 percent.
In the West, the least affordable region, Montana led all states with 88 percent price growth from 2005 to 2018. Despite the strong price growth in California since 2012, prices have only increased by 19 percent since 2005. Nevada shows a 9 percent price change over this time turning around any previous loss in value.
In the Midwest where affordability is most favorable, North Dakota led all states with 115 percent price growth from 2005 to 2018. Illinois, while having the smallest growth in the region had an estimated 12 percent price growth over this time.
In the Northeast where sales and price growth is typically slow, Pennsylvania lead the region with a 48 percent price growth from 2005 to 2018. Rhode Island, while having the smallest gain of all states, increased 6 percent price change over this time. Rhode Island is one of two states that turned around a negative property value over this time compared to 2017.
 I used the FHFA expanded data set not seasonally adjusted data.
 Based on NAR housing affordability index
With rates rising and home price growth starting to slow, I started to consider how much income is used towards housing in this current economic climate. Mortgage rates are trending upwards to near the highs of 2011 at 4.98 percent, home prices are still rising but at a slower pace, and the median income has been steadily rising although an even more modest pace than house prices. These factors go into how much of a person’s income goes towards housing expenditures and whether housing is a burden for potential homebuyers. This blog will highlight some of the factors and show states and regions where housing is less of a financial burden.
Home Price vs Median Family Incomes
Home prices since 2000 started to outpace incomes but started to turn towards the end of 2007, until home prices plummeted during the Great Recession. In 2008, incomes grew making it favorable for potential homeowners to buy a home. It took home prices about 4 years to recover, beginning in 2012. Around 2014 home price growth began to bloom and once again, prices started to outpace incomes. This pace has continued until recently, as home price growth has slowed making owning a home affordable. As of the second quarter of 2018, family incomes have increased by 52 percent since 2000, while housing prices have increased by 95 percent, or nearly doubled the level in 2000.
Payment to Income and Mortgage Rates
Let us look at the amount of money homeowners had to commit from their income to be able to afford a home. In 2000, when interest rates were 7.90 percent, homeowners had to spend about 19.6 percent of their income to be able to afford a home. In 2006 when rates were around 6.50 percent, homeowners had to spend 22 and up to 24 percent of their income on a home. In the wake of the Great Recession in 2009-2010, mortgage rates started to fall, so the share of income that went to paying a mortgage declined. In 2013 when rates were down to 3.47 percent, the mortgage payment on a median priced home was 11 percent of the median family income, putting less pressure on household incomes. Since that time rates have continued to decline, much to the benefit of potential homeowners. Anything above 30 percent is considered burdensome on households, but below that range would be typically affordable. On a regional level, the West requires a higher portion of your income, which has eclipsed the 35 percent mark. The Midwest, being the most affordable region, requires the least percentage of median family incomes. The Midwest started around 15 percent and, at times, dipped below 10 percent and is currently hovering back around 15 percent.
Payment to Income Ratio
A ratio between 2.5 and 4 is normal and healthy price to income ratio for the housing market. As of August 2018, the median price of existing homes sold was 3.5 percent of the median family income. The Harvard University Joint Center for Housing Studies (JCHS) produced a map showing the US home price to income ratios. The ratios range from under two to over eight. As the map below illustrates, costal markets have much higher ratios, indicating significantly higher home prices compared with incomes. The West Coast region has affordability issues, with several areas posting ratios above eight, including San Diego, Los Angeles and the San Francisco metropolitan area. Small pockets in the Northeast reach above five, mostly clustered around New York City and Boston. The Miami/ South Florida Region also posts low affordability. In comparison, The Midwest region has ratios in the 2-3 range, in line with historical averages.
Jobs Generated vs GDP Growth Rate
The Gross domestic product (GDP) has hovered around 3 percent and has had to withstand the tech bubble, wars and several crises. In 2009, both jobs and GDP took a dive but rebounded the following year. GDP and jobs have grown solidly after the Great Recession. Unemployment has been below 6 percent ever since 2014, which is good for economic progress and potential homebuyers.
Even with rising rates and higher home prices, potential homebuyers have plenty of reason to join the market. Real Estate is still affordable in several states and regions. The job market is strong, GDP is at a healthy level and consumer confidence is high. New homes and existing inventory figures are now improving, although still modestly, but the increase in inventory is helping tame price growth.