May 16, 2012 (Chris Moore)
Housing affordability has reached its highest level since 1970 according to the National Association of Realtors® (NAR) and with mortgage interest rates expected to remain low and home prices stabilizing, this year may be the most affordable housing market in over 40 years.
NAR’s Housing Affordability Index surpassed 200 for the first time its history, reaching a record high 205.9 in the first quarter of 2012. That was up from a downwardly revised 197.0 in the fourth quarter of 2011.
The Index uses a base value of 100 to represent the point where a median-income household has enough income to qualify for the purchase of a median-priced existing single family home. The conditions assume that the household would have a 20 percent down payment and be capable of devoting 25 percent of their income to their total mortgage payment.
If the value falls below 100, the less purchasing power the household would have, if it goes above 100, the greater the purchasing power of the household.
Since the Housing Affordability Index has surpassed 200, the typical household has roughly double the income they need to purchase a median-priced home. The median family income in the first quarter was 60,972 but it only took a qualifying income of $29,616 to purchase an existing single-family home at the current median price of $158,100.
Moe Veissi, president of NAR, stated, “For those with good credit, we’ve never seen better housing affordability conditions or market opportunities than we see at present. Although home prices are stabilizing and sales are rising, some buyers still have to jump through a lot of hoops to convince a lender that they are creditworthy, even for a mortgage that would be well within their means. This is especially true for self-employed buyers.”
With mortgage rates expected to remain low and home prices expected to remain soft, the affordability index is expected to remain near all-time highs through-out 2012.
Tags: NAR, housing affordability index, low mortgage rate, soft home prices, median-income, purchasing power
Source:
NAR
