2012 to Set a Record for Housing Affordability
The National Association of Realtors announced Wednesday that its Housing Affordability Index stood at 198.2 at the end of November, and it forecast a full-year record high of 194 when December’s index is calculated.
The association calculates the index based on the median home price, family income, and average mortgage interest rate. A reading of 100 is the point at which a family with a median income can afford a median-priced home, and a higher index number indicates more purchasing power available to consumers.
Looking ahead, 2013 is expected to be the third best year on record in terms of household buying power — provided buyers are able to qualify for a mortgage.
The NAR projects the national Housing Affordability Index to average 160 during the year ahead, which means that a median-income family would have 160 percent of the income needed to purchase a median-priced single-family home. Even in Western states, where the regional affordability index is lower, a typical family is “well positioned in most markets,” the NAR said.
The past year, while notable for its low home prices and mortgage rates, had its problems, too: low inventory, steep competition for homes, and tight mortgage lending standards, which kept many families from buying homes.
Fortunately, a gradual rise in home prices that started in the second half of 2012 is expected to coax more sellers into the market in 2013, which should help relieve the pent-up demand for homes.
(Dollar bills photo courtesy of Images of Money, via Flickr.)