Home affordability conditions hit record levels
2012 a record year for affordability
Housing affordability conditions reached record levels in 2012, the National Association of Realtors (NAR) revealed in a recent report.
According to the NAR, its Housing Affordability Index reached 198.2 in November, which brought the 2012 Housing Affordability Index to a record high of 194.
Although the record 194 index is based on 11 months of data, it is likely that it will still surpass the previous record of 186 set the previous year once the final month’s data is added to the equation.
“Although 2012 was highest on record, the excessively tight underwriting precluded many would-be homebuyers from locking-in generational low interest rates,” Lawrence Yun, NAR chief economist, said in a statement.
Yun continued, giving a brief forecast for the year to come.
“Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power,” he said, “A window of opportunity remains open for buyers who can qualify for a mortgage.”
The Housing Affordability Index, which the NAR started recording in 1970, factors three main components into its equation: median home price, median family income and average mortgage rates. If the Index moves higher, so does affordability and, therefore, the purchasing power or potential homeowners.
NAR President Gary Thomas echoed Yun’s concerns about strict bank policies holding back a complete recovery.
“A more sensible lending environment that makes it easier for other financially qualified buyers to get a mortgage would allow many more households to enter the market, boosting home sales as much as 10 to 15 percent,” Thomas said.