The National Association of REALTORS(R) has been reporting and tracking a “Housing Affordability Index” since January 1989. The index looks at whether or not an average family (an income equal to the median income) can qualify for a loan to buy a median-priced home.
The Housing Affordabiity Index for June was at 159.2 meaning that a family with an average income has 159% of the income they need to afford an average house. This is down from the revised index for January of this year of 176.9 which makes January the month housing was the most affordable since the National Association of REALTORS(R) began this index 20 years ago.
If the index had a value of 100 that would mean a family making the median income has the exact amount of income necessary to qualify for a loan to buy a median-priced home. A value beneath 100 means the family is falling short of enough income and any over 100 means the family has more than enough income.
It appears that lower prices along with low interest rates are bringing buyers back into the market as the market continues to show signs of life and gives us hope that we may be near the bottom.
The National Association of REALTORS(R) issued their Pending Home Sales Index Report for May which only showed a modest increase of 0.1% over April, however May marks the fourth month in a row the index has increased. Not since the middle of the boom (October, 2004) have we seen pending sales up four months in a row.
Lawrence Yun, NAR chief economist, does warn though that there may be delays in getting these new sales closed saying “closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions.” Yun is no doubt referring to the new, and controversial, Home Valuation Code of Conduct (HVCC). Yun goes on to say “rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.” Read more…
We continue to see some encouraging data on the real estate market showing that buyers may be gaining some confidence in the market. To this point, the National Association of REALTORS(R)Pending Home Sales Index Report for May showed a very modest increase of 0.1% on the index, over April, making it the fourth monthly increase in a row…something we haven’t seen sine October 2004.
Lawrence Yun, NAR chief economist, does give caution though about the time it may take these sales to result in closings saying “closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions.” So once again, it appears Home Valuation Code of Conduct (HVCC)is in the spotlight. Yun goes on to say “rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.” Read more…
Lawrence Yun, NAR chief economist, said “buyers are responding to very favorable market conditions. Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market. ”
Pending sales in the US overall were up 6.7% from March and up 3.2% from April of last year. Three of the four regions showed an increase; the Northeast shot up 32.6% from March and is slightly ahead of the same time last year, the Midwest was up 9.8% for the month and up 11.1% from last year, the West rose 1.8% over March but is down 2.9% from a year ago and the South had a minor decrease for the month of 0.2% but is still showing a 3.5% increase over last year.
According to a new study by the Center for Housing Policy despite declining home prices, many of the jobs created through the federal stimulus package do not pay enough to afford a home.
According to a new study by the Center for Housing Policy despite declining home prices, many of the jobs created through the federal stimulus package do not pay enough to afford a home.
Over the past couple of months I have written several posts about the affordability of housing….with interest rates continuing to drop, affordability continues to increase.
At the current rates, for every $100,000 you borrow on a 30 year loan you are looking at a monthly payment of only $525.00. This, coupled with lower home prices, presents a wonderful opportunity for home ownership…that is, of course, if you are lucky enough to have a job or stable income.
Today the Federal Reserve Board, in it’s monthly Beige Book, said about Real Estate and Construction that “housing markets remained depressed overall, but there were some signs that conditions may be stabilizing.”
This is encouraging and is consistent with my recent comments in posts that I think perhaps we are nearing the bottom of the market. As I have said before I think it is going to be a slow recovery, but stabilizing the market would be a huge step in the right direction. Read more…
The National Association of REALTORS(R) has been reporting and tracking a “Housing Affordability Index” since January 1989. The index looks at whether or not an average family (an income equal to the median income) can qualify for a loan to buy a median-priced home.
The Housing Affordabiity Index for February was at the highest level since the indexes inception, meaning homes are more affordable now, and within reach of more Americans than in the past 20 years. Major factors in this finding, in addition to falling prices, are record low interest rates since NAR uses the current interest rates to determine the income a buyer would need to qualify.
For February, NAR’s report showed mortgage rates at 5.12% which is the lowest mortgage rate used in the past 20 years.
If the index had a value of 100 that would mean a family making the median income has the exact amount of income necessary to qualify for a loan to buy a median-priced home. A value beneath 100 means the family is falling short of enough income and any over 100 means the family has more than enough income.
For February the index for the U.S. was 173.5. This is up from a revised 172.6 in January and up from 137.2 a year ago. This means the average family in the US has 60% more income than they need to buy an “average” (median-priced) home.
In the UofV report William Lucy the author of the report, looked at, among other things, the relationship of home prices to median income. In his report he then compared this to the same data for the year 2000. I thought his choice of the year 2000 was good for comparison as I feel the real estate market at that time as “normal”. It was prior to the impact of 9/11, prior to the real estate “boom” and after the recession times of the 90′s.
These two posts got me thinking…In the post on affordability I think the Read more…
By: Dennis Norman
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Last week I wrote a