By: Dennis Norman
The National Association of REALTORS(R) has been reporting and tracking a “Housing Affordability Index” since January 1989. The index looks at whether or not an average family (an income equal to the median income) can qualify for a loan to buy a median-priced home.
The Housing Affordabiity Index for February was at the highest level since the indexes inception, meaning homes are more affordable now, and within reach of more Americans than in the past 20 years. Major factors in this finding, in addition to falling prices, are record low interest rates since NAR uses the current interest rates to determine the income a buyer would need to qualify.
For February, NAR’s report showed mortgage rates at 5.12% which is the lowest mortgage rate used in the past 20 years.
If the index had a value of 100 that would mean a family making the median income has the exact amount of income necessary to qualify for a loan to buy a median-priced home. A value beneath 100 means the family is falling short of enough income and any over 100 means the family has more than enough income.
For February the index for the U.S. was 173.5. This is up from a revised 172.6 in January and up from 137.2 a year ago. This means the average family in the US has 60% more income than they need to buy an “average” (median-priced) home.
[...] affordability, low-interest rates and lower home prices (read more about affordability in my earlier post about it) presents a great opportunity to buy a home. To qualify for the credit you must be a [...]