Getting In The Door

February 4, 2002

Housing Affordability At Its Highest Point Since 1973

Inman News Features

Low mortgage interest rates, rising family income and a seasonal dip in the median existing-home price combined to improve housing affordability conditions in the fourth quarter, according to the National Association of Realtors.

NAR's composite Housing Affordability Index was 146.8 during the fourth quarter of 2001, up 9.4 percentage points from 137.4 reported in the third quarter. The gauge was 13.4 points above the same period a year earlier when it stood at 133.4. In addition, the HOI is at its highest point since 1973 when it reached 147.9.

The index shows the nation's typical household had 146.8 percent of the income needed to purchase a home at the fourth quarter median existing-home price, which was $148,000.

The index measures affordability factors for all home buyers making a 20 percent down payment, 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 fourth-quarter median family income was $53,914, which would qualify to buy a home costing $217,300.

NAR President Martin Edwards Jr. said excellent housing affordability conditions contributed to a record year for home sales.

"Low interest rates have been opening the door to low- and moderate-income buyers, allowing many new families to become homeowners," said Edwards. "Immigrants and minorities are a significant portion of the entry-level market. When they can achieve the American dream of homeownership, it allows existing owners to sell their homes and boosts all segment of the market."

The NAR?s First-Time Homebuyer Affordability Index shows a typical first-time buyer household, aged 25 to 44, with an income of $36,720, had 85.2 percent of the income needed to purchase a typical starter home with a 10 percent down payment.

The median starter home price was $125,800, during the fourth quarter, and the median-income first-time buyer could afford a home costing $107,200, according to NAR.

Copyright: Inman News Service

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