Reprinted from DSnews.com
Written by Esther Cho
Home affordability has reached the highest peak since 1970, which is when the data was first recorded, according to National Association of Realtor’s (NAR) housing affordability index. The index rose to 206.1 in January, and an index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced single-family home, assuming a 20 percent down payment and 25 percent of gross income for mortgage principal and interest payments.
“This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” said Moe Veissi, NAR president.
While projections about future mortgage rates and home prices have been mixed, NAR expects little change and anticipates affordability levels will stay high through 2012.
“Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”
The index is based on the relationship between median home price, median family income, and the average mortgage interest rate.