Affordability Still Strong
Despite an increase in home prices, NAR’s Housing Affordability Index suggests the national median priced home was more affordable for a median income family by August 2012 than it was a year earlier. This is due to low mortgage rates, which are almost an entire percentage point lower than last year, and a 1.4 percent increase in nominal family income from 2010 to 2011 – NAR projects a subsequent increase for 2012.
The HAI shows the median income family earns 85 percent more than the income needed to qualify to purchase the typical home. Year over year, affordability improved in almost every region.
What does this all mean? Buyers looking to get into the market may be under the impression that the increase in prices means housing is becoming unaffordable. This isn’t the case. Real estate is still very affordable in most markets. Talk to a Realtor® about market conditions in their area. Are their clients concerned they’ve missed out on the best time to buy? Talk to prospective buyers for their thoughts about today’s market. Do they think housing is still affordable?