Housing Affordability Close to 4-Year High in September

According to the NAR's most recent report, the housing affordability index (HAI) reached 135.2 in September, which is close to a four-year high (see chart above) and just slightly below the 135.4 level in February (when 30-year mortgage rates dipped below 6%).

An HAI of 135.2 means that a family earning the median family income in September ($60,730) had 135.2%% of the income necessary to qualify for a conventional loan (at 6.22%) covering 80% of a median-priced existing single-family home in September ($190,600).

Since July 2007 when the HAI was at only 103.6 (due to higher home prices and interest rates, $228,500 and 6.8% respectively), the 31.6 point increase in housing affordability to 135.2 over the last 14 months should continue to play an important role in the recovery process for the slumping real estate market. It's a buyer's market.

Note: The NAR's report on housing affordability index released last Wednesday received no media attention; I couldn't find a single news report. But you'll find hundreds of stories on foreclosures and falling home prices. Go figure. Positive, upbeat news doesn't sell as well as gloom and doom?

Comments

[kebu77:]

How many median income familys have 20% to put down? If the NAR also ran HAI numbers for 5% down and 10% down, figured with the higher interest rates that come with lower FICOs and higher LTVs, with PMI added in, then a fuller picture might emerge.

In the short run, thru next spring, mortgage interest rates are likely to rise with rising 10-yr treasuries. In addition we are seeing record suspensions in 401k contributions (even as consumption drops) which will result in increased income taxes, draining further from disposable income.

2008 Nov 03 11:37 AM

[rogersails:]

So NAR says affordability is close to a 4 year high. What the graph doesn't show is that affordability is historically low, and would be a LOT lower if not for the full might of Uncle Sam doing it's best to keep low cost money flowing to the mortgage markets. NAR is always cheerleading that this is a great time to buy (well, duh). Most of the financial system joins the chorus.

PS I checked the NAR website - they're not showing any data pre 2005.

2008 Nov 03 03:11 PM