The National Association of Realtors released data for the Housing Affordability Index yesterday and it appears that housing is becoming more affordable. The index assumes that buyers put 20% down and have a 25% qualifying ratio for monthly housing expense to gross monthly income. These figures don’t take into account that far fewer loans are available to consumers with marginal credit and down payment amounts, so these figures reflect affordability to only the most qualified buyers. Nevertheless, it is the only measure of affordability for home prices across the country.
The percentage of a buyer’s income that went to mortgage payment was 21.6% in September 2007 and now is only 18.5%. The gain in these figures are mostly credited to a decline in median price from $208,600 to $190,600 in the same period. The index score for buyers with a fixed mortgage was 115.8 a year ago and now stands at 135.2 with the higher score signifying more affordability.
Homes are also more affordable when you look at these figures in the South. The index score jumped from 126.6 a year ago to 138.9 this month. The median home price currently stands at $167,700 with mortgage payments representing only 18% of monthly income.
It’s not a surprise that the Housing Affordability Data shows home are more affordable today. The only problem is that consumers are less confident about the economy and their own financial situation. Job security is far worse and it’s more difficult to obtain mortgages these days.
download pdf: NAR Housing Affordability Index Q3 2008