Analysis for the Housing MarketThe new home affordability ratio in June increased back to its highest levels since March due to a sharp drop in new home prices. The affordability ratio now stands at 56.9% compared to 56.3% in May and 47.1% in the same year-ago period. Rising mortgage rates were offset by a steep drop in median new home prices which caused affordability to increase from last month; both rates and prices remain considerably lower than they were this time last year.

The June figure illustrates that 56.9% of all households across the country could afford to purchase a new home at the median price of $206,200 when using a 20% down payment and a 30-year fixed rate mortgage with June's average fixed rate of 5.42%. Household income of $49,713 would be needed to qualify for the purchase of the median priced new home using a fixed rate mortgage, while an income of $47,718 would be needed to qualify using a 1-year adjustable rate mortgage at an average rate of 4.93%. Definitions and Importance for the Housing Market

Because information on the percentage of borrowers who can put 20% down is not available, an exact affordability ratio cannot be calculated. A 10% down payment assumption reduces affordability by at least 5%.