The affordability of U.S. homes dropped to a 14-year low in the second quarter, when prices rose at the fastest pace in more than a quarter century.
The average household had 120.8 percent of the income needed to purchase a property at the median home price of $208,500, according to a report issued this week by the National Association of Realtors. That figure was the lowest since the third quarter of 1991, when it was 113.7 percent.
Prices for existing homes gained 14 percent in the second quarter from a year earlier, more than at any other time since 1979, NAR said. At the same time, mortgage rates fell to the lowest level of the year.
"The strong rise in prices cut into affordability, even with the low rates," said Lawrence Yun, an economist with the Realtors group.
A reading of 100 means a household with the national median income makes exactly enough to pay for a median-priced home, assuming the buyer makes a 20 percent down payment. In the previous three months, the index measured 133.2 percent.
Median household income rose 4.8 percent to $56,917 from a year earlier, the NAR said. The average percentage of a household's income used to pay a monthly mortgage bill rose to 20.7 percent, the highest since 1991. A year earlier, the share was 18.9 percent.
The average rate for a 30-year fixed mortgage was 5.74 percent in the second quarter, down from 5.76 percent in the first quarter, Fannie Mae said. The rate probably will average 5.68 percent this year, which would be the lowest ever recorded, Fannie Mae said last month.