October Housing Affordability Surges to Highest Level Since 2002

According to the National Association of Realtors' (NAR) most recent report, the housing affordability index (HAI) reached a six-year high of 141.8 in October (see chart above). An HAI of 141.8 means that a family earning the median family income in October ($60,840) had 141.8%% of the income necessary to qualify for a conventional loan (6.23% fixed-rate) covering 80% of a median-priced existing single-family home ($181,800).

Since June 2008 when the HAI was at only 119.3 (due to higher home prices and interest rates, $213,600 and 6.28% respectively), the 22.5 point increase in housing affordability to 141.8 over four months should play an important role in the recovery process for the slumping real estate market. It's the best buyers' market for real estate since at least 2002.

Comment: The NAR's report on housing affordability index released last week received no media attention at all; I couldn't find a single news report on housing affordability reaching a six-year high - shouldn't that be reported? On the other hand, 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? Further, housing affordability will likely surge next month as a result of the recent drastic drop in 30-year mortgage rates to a five-year low of 5.47%.

Comments

[raytayzmd:]

....and what happens to HAI if everybody's income drops from an average of 60,000 to, say, 40,000?...

2008 Dec 04 09:34 AM

[baldguy:]

this guy has got to be on the NAR payroll!!

2008 Dec 04 10:23 AM

[raytayzmd:]

...interesting -- read his post from February of this year:

seekingalpha.com/artic...

...so much for the value of a Ph.D and one reason why I worry when I see Obama putting Ph.D's in important economic posts.

2008 Dec 04 11:12 AM

[rm:]

[An HAI of 141.8 means that a family earning the median family income in October ($60,840) had 141.8%% of the income necessary to qualify for a conventional loan (6.23% fixed-rate) covering 80% of a median-priced existing single-family home ($181,800).]

...which means that the family earning the median income cannot afford the median home. Is this disparity a good thing? Or are there lots of families shopping around with a 20% down payment (plus closing costs)?

2008 Dec 04 11:15 AM

[Paco6945:]

It's puzzling to me why there is always a gaggle of commenters who post negative comments about Perry's articles. All he is doing here is posting a NAR chart. That's what he does. The NAR chart is benign. It is one measure of housing affordability that has been published for years. The value in the chart is in the trend line. His comment about no media attention is interesting, if true.

None of the first four comments add anything of value to the conversation. It would seem you guys would have better things to do with your time. Try rational thought for a change. You might be pleasantly surprised at how good it feels.

2008 Dec 04 04:43 PM

[CLH:]

These comments come from left wing nit wits.

2008 Dec 04 08:35 PM