How Scary is the Housing Affordability Index?

    Affordability-KCM

    Some industry pundits are saying that the housing market may be heading for a slowdown. One of the data points they use is the falling numbers of the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

    Here is how NAR defines the index:

    “The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

    Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

    The higher the index the easier it is to afford a home.

    Why the concern?

    The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market. Here is a snapshot of the index since 2009:

    How Scary is the Housing Affordability Index? | Keeping Current Matters

    But, wait a minute…

    Though the index has decreased over the last four years, we must realize that at that time there was an overabundance of housing inventory and as many as one out of three listings was a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

    The market is recovering and values are coming back nicely. That has caused the index to fall.

    However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008. We can see that, even though prices have increased, historically low mortgage rates have put the index in a better position than every year for the nineteen years prior to the crash.

    How Scary is the Housing Affordability Index? | Keeping Current Matters

    Bottom Line

    The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

     

    Source:  Keeping Current Matters

    Trackback from your site.

    Steve Baker

    Steve comes to the world of real estate with nearly 30 years of Marketing and Graphic Design experience. These two very important skills make him ideal for this profession. In 2017 he achieved his highest accolade to date becoming a global, award-winning real estate graphic design/marketing recipient. Mr. Baker is not only a REALTOR but the Director of Marketing for Rinehart Realty. His education and work experience also include a Bachelor degree in Education and degrees in Radiologic Technology and Medical Ultrasonography. He was a pioneer in the field of Radiology PACS development and Radiology Voice Recognition adoption and implementation in southwest Virginia. His previous positions as Director of Radiology and PACS Administrator lead to enormous development in resources and project management necessary to succeed in the field of real estate. Steve is a writer and developer for a variety of blogs and real estate publications. He recently completed his first book of quotations and is currently working on a Real Estate Marketing book. He is a strong supporter of the United Way, having won a past Campaign Coordinator of the Year award. He is also a strong advocate for breast cancer research and education. Mr. Baker has a history of work experience developed on the foundation of a strong work ethic, the pursuit of excellence, quality, honesty and integrity.

    Leave a Reply

    Contact Us Now

    Any questions, comments, or feedback