NAR President Charles McMillan stated recently how ironic it was that in a scenario as we find ourselves in where the housing market is weak, that affordability conditions have improved dramatically.
“Housing affordability is at a record high – the buying power of a typical family has risen significantly,” McMillan says. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and help prices to stabilize in many areas by the end of this year.”
The NAR’s Housing Affordability Index rose 13.6 percentage points in January to 166.8, a new record high. According to the NAR, “The Housing Affordability Index is a broad index of affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.”
The NAR also stated today that the HAI indicates a median-income family, earning $60,000, could afford a home costing $283,400 in January with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest; affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount. A year ago, the typical family could afford a home costing $263,300.
“Conditions have been aligning very favorably for home buyers with the exception of consumer confidence,” Yun says. “But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.”
The author Hank Bailey is real estate broker in the state of Georgia. He blogs at athensproperties.wordpress.com/.
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