According to the National Association of Realtors®, there are new record highs for the housing affordability index. Since 1973 when the NAR began keeping records, the affordability in housing has risen to a record high of 206.1. This number comes from the connection between median family income, median home price and the average mortgage rate. So, the more household purchasing power we have, the more the index will rise.
Typically, first time buyers who make small down payments have a lower affordability level. However, an index of 100 is the point where households with a median income have just enough income to be eligible for the purchase of an existing single-family median priced home. This is assuming that the buyer can put 20% down and use 25% of their gross income for the mortgage payment.
There are plenty of home buying opportunities in today’s real estate market since the housing affordability index broke the two-hundred mark, which means the average family has almost doubled the income needed to buy a median priced home. Therefore, if you can qualify for a mortgage, now is the best time to buy a home.
The NAR is predicting that the housing affordability rate will remain at an annual high throughout 2012. They are also expecting very little movement in home prices or mortgage interest rates this year.
For the first time in a while, the housing inventory levels have declined so we are becoming more balanced around the nation. And, now that access to credit is improving, we will see more home sales and stabilization in home prices. We will probably see some modest home price gains in the areas with strong job growth too.