Housing Affordability Reaches Record High
Categories | Mind Your Money |
The Housing Affordability Index rose to a record high of 205.9 in the first quarter of 2012, breaking the 200 mark for the first time since recordkeeping began in 1970.
According to NAR, a household earning the median family income of just under $61,000 could afford a home costing $325,500 in the first quarter. That's remarkable purchasing power when you consider that the median cost of an existing home nationwide is $158,100.
Currently, the median monthly mortgage principal and interest payment for a median-priced home would take only 13.5% of gross income.
Commenting on the report, NAR's president Moe Veissi said, "We've never seen better housing affordability conditions or market opportunities than we see at present."
Housing affordability is based on a combination of factors, including the median home price, median family income and the average mortgage interest rate. A composite Housing Affordability Index of 100 is defined as the point where a median-income family household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a down payment of 20% and 25% of gross income devoted to mortgage principal and interest payments.
Also, conditions for first-time homebuyers have never been better. A companion index measuring the ability of first-time homebuyers to purchase a home rose to a record high of 135.8 in the first quarter. The index is configured differently for first-time homebuyers: an income of 65% median ($39,632), a starter home of 85% median ($134,400), and a down payment of 10%.
According to NAR, first-time homebuyers could afford a home costing $182,500, an amount well above the overall median-price home.
For the year, the Housing Affordability Index is projected to set a record high average of 191. For more information about the favorable home-buying environment as well as record low interest rates, call today.