Housing affordability index stays near 30-year high

|tab|

Housing affordability conditions slipped in the second quarter but still were at the second highest level since 1973, according to the National Association of Realtors.|ret||ret||tab|

NAR's composite Housing Affordability Index was 143.4 during the second quarter, down 0.7 percentage points from a 30-year high of 144.1 reported in the first quarter; it was 11.8 points higher than the same period a year earlier when it stood at 131.6. The previous high was an index of 147.9 recorded in 1973.|ret||ret||tab|

David Lereah, NAR's chief economist, said low interest rates have been the biggest factor in favorable housing affordability conditions. "Historically low mortgage interest rates largely offset higher home prices, keeping housing affordability close to a three-decade high," he said.|ret||ret||tab|

The index shows the typical household had 143.3 percent of the income needed to purchase a home at the second-quarter median existing-home price, which was $168,900. This index measures affordability factors for all home buyers making a 20 percent downpayment, with an index of 100 defined as the point where a median-income family has the exact amount of income needed to purchase a median-priced existing home. The second-quarter median family income was estimated at $53,285.|ret||ret||tab|

NAR President Cathy Whatley, owner of Buck & Buck Inc. in Jacksonville, Fla., said that even though the index reading edged down, the typical family could afford a more expensive home than in the first quarter. |ret||ret||tab|

"A household earning the median income could afford a home costing $242,200 in the second quarter, which is well above the median price in most markets across the country," she said. |ret||ret||tab|

According to the Federal Housing Finance Board, which began tracking interest rates in 1973, the average effective mortgage interest rate for existing homes was a record-low 5.58 percent during the second quarter, down from 5.9 percent in the first quarter; it was 6.82 percent in the second quarter of 2002. This is a weighted average interest rate between fixed and adjustable loans, including the cost of points, and represents a true bottom-line mortgage cost. |ret||ret||tab|

Affordability for first-time home buyers slipped 0.7 percentage points in the second quarter to an index of 82.7, but was 5.8 percentage points above the second quarter 2002 index of 76.9.|ret||ret||tab|

The association's First-Time Homebuyer Affordability Index shows a typical first-time buyer household, age 25 to 44, with an estimated income of $30,528, had 82.7 percent of the income needed to purchase a typical starter home with a 10 percent downpayment. |ret||ret||tab|

The index shows a typical entry-level buyer could afford a home costing $118,800 during the second quarter. |ret||ret||tab|

[[In-content Ad]]