According to the NAR Housing Affordability Index, housing is at its most affordable in a generation. More specifically, the index shows there hasn’t been a better home buying opportunity in 40 years.
The HAI, comprised of median home prices, median family income, and the current mortgage rate, looks at the ability of the typical family to buy a median priced home. An index of over 100 means a family has enough income to be able to purchase a house. An index of 120 implies a median income family has 20 percent more income than is necessary to purchase said home. This year, the index will likely surpass 180.
The rise in affordability can be attributed to a combination of lower home prices, record low mortgage rates, and a slight rise in family income.
So what’s the problem? Despite record affordability, qualified families continue to face challenges due to overly stringent underwriting standards. The unwillingness of banks to lend is holding back buyers and offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers. Talk to Realtors® and
recent home buyers about the impact of these underwriting standards on their ability to complete transactions.