Here are the ugly numbers on Boston housing ‘affordability’ – The Boston Globe

The pandemic, and the government’s fiscal response, ignited inflation, forcing the Federal Reserve to raise interest rates to levels last seen in 2000.

And the pandemic broke the home-buying market, which saw prices soar as city dwellers fled to the suburbs, then settled into gridlock as the sharp rise in mortgage rates pushed would-be buyers and sellers to the sidelines.

(As I explained on Monday, apartment rents also surged, though they’ve begun to moderate in many cities — Boston being a notable exception — as demand eases and new supply comes online.)

So how bad is it out there for prospective homebuyers?

The Federal Reserve Bank of Atlanta has an index that tracks homeownership affordability on the national, metro, and county levels. The index is based on the percentage of median household income needed to cover monthly mortgage payments. The numbers aren’t pretty.

Affordability goes beyond the price of a house or condo. For anyone needing a mortgage, interest rates are the big driver of monthly outlays. And the bottom line — whether buyers can reasonably swing the monthly nut — hinges on their income.

Consider this example: In the Boston metropolitan statistical area (which stretches from the South Shore to the eastern edge of Lake Winnipesaukee in New Hampshire), the median home price was $580,000 in May, up slightly from the same month a year earlier, according to the Atlanta Fed’s most recent data. (The median price is the point at which half the homes sold for more and half sold for less.)

But with the average rate on a 30-year fixed mortgage rising to 6.8 percent from 5.1 percent during that period, the median monthly payment (including homeowners insurance, real estate taxes, and private mortgage insurance) climbed 7.3 percent to more than $4,290. That payment equaled 47 percent of the region’s estimated median income in May — well above the 30 percent standard for affordability used by the Department of Housing and Housing and Urban Development.

The share of income required to cover the median home in the region averaged 33 percent from 2014 to 2019. Since the start of 2022, the average has jumped to 43 percent. Here are some other nuggets from the Atlanta Fed index.

• Boston was the 17th least affordable metro in the country in May. Excluding nine off-the-chart California metros and always pricey Honolulu, we ranked seventh.
• Within the Boston region, Essex County was the least affordable, at nearly 49 percent of median income in April, the most recent month for which county data are available. Plymouth County was the most affordable, at 40 percent.
• Providence’s affordability is almost as bad as Boston’s. While the median home price is 25 percent less in Little Rhody, so is the median income.
• In the top-ranked San Francisco-Oakland-Hayward area, buyers needed 83 percent (not a typo!) of the median income to buy the median-priced home. In the South Florida corridor of Miami-Fort Lauderdale-West Palm Beach, it was 54 percent.
• The most affordable metros in the country: Akron, Ohio, Scranton, Pa., and Des Moines, Iowa, which are all bunched around 27 percent of median income.

With a 30-year fixed-rate mortgage running at 7 percent — compared with 3 percent before COVID hit — the obvious question is when will the Federal Reserve start lowering interest rates. In their most recent forecasts, Fed officials signaled that they could begin easing borrowing costs next year.

When next year? Timing depends on the progress made in getting inflation back to the Fed’s 2 percent target.

Thursday’s inflation news was encouraging. The Labor Department reported that the “core” consumer price index, which excludes volatile food and energy prices, rose at an average annualized rate of 3.1 percent over the past three months. While that’s higher than the Fed wants, it’s less than half the rate a year earlier.

Private forecasters expect the central bank’s benchmark lending rate, known as the federal funds rate, to decline to about 4 percent by the end of 2024 from the range of 5.25 to 5.5 percent today, according to Bloomberg. But here’s the thing: Their estimates factor in an economic slump, which would also prompt the Fed to loosen credit.

The consensus forecast is that economic growth will slow to just 0.6 percent by the end of next year from 2.1 percent in 2022. The jobless rate, meanwhile, would rise to 4.5 percent from 3.5 percent last month.

So, yes, buying a home should get more affordable. Unless you’re among the hundreds of thousands of Americans who might lose their jobs.

Larry Edelman can be reached at larry.edelman@globe.com. Follow him @GlobeNewsEd.