Home Affordability Shows Some Improvement
Good news for buyers: It’s getting easier to afford to buy a home.
The median price of a single-family home inched lower in August, the latest data available, while median family income edged slightly higher, according to the National Association of REALTORS®’ Housing Affordability Index. That, combined with still-low mortgage rates, prompted NAR’s affordability index to rise to its highest level since May. (The higher the number, the better indication of affordability.) NAR’s Housing Affordability Index was 157.7 in August, up from 154.5 in July. However, the index is down from one year ago, when it was 160.2.
“This year-on-year slippage reflects the well-known fact that home prices have been moving up at a rate much faster than incomes, year after year,” says Brad Hunter, chief economist for Metrostudy, a real estate research firm. “That said, homes are still much more affordable than they were during the boom, and mortgage rates are still extremely low, which helps all of the affordability measures.”
In a closer look at the numbers in August, median home prices decreased from 233,400 to $230,200. Median household income rose from $67,614 to $67,752.
“Buying a home has actually been more affordable this year than last year, despite rising home prices, thanks primarily to falling interest rates,” says Daren Blomquist, RealtyTrac’s vice president. “Just when we think interest rates are as low as they can go, they go a little bit lower, helping buyers eke a little more buying power out of their income.”
Source: “Home Affordability Takes a Turn for the Better, NAR Reports,” NerdWallet (Oct. 16, 2015)