March 13, 2012 (Chris Moore)
For buyers who can qualify for a mortgage, now is very good time to purchase a home according to the National Association of Realtors® (NAR), as housing affordability has reached its highest level since the organization began keeping records in 1970.
NAR’s Housing Affordability Index surpassed 200 for the first time its history, reaching a record high 206.1 in January.
The Index uses a base value of 100 to represent the point where a median-income household has enough income to qualify for the purchase of a median-priced existing single family home. The conditions assume that the household would have a 20 percent down payment and be capable of devoting 25 percent of their income to their total mortgage payment.
If the value falls below 100, the less purchasing power the household would have, if it goes above 100, the greater the purchasing power of the household.
Since the Housing Affordability Index has surpassed 200, the typical household has roughly double the income they need to purchase a median-priced home.
Moe Veissi, president of NAR, stated, “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. For buyers who can qualify for a mortgage, now is a very good time to become a homeowner.”
With mortgage rates expected to remain low and home prices expected to remain soft, the affordability index is expected to remain at an annual high for all of 2012.
“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,” Veissi added.
Tags: NAR, housing affordability index, low mortgage rate, soft home prices, median-income, purchasing power