Wednesday, December 03, 2008

October Housing Affordability Surges To Highest Level Since 2002: Where Are The News Reports?

According to the National Association of Realtors' (NAR) most recent report, the housing affordability index (HAI) reached a six-year high of 141.8 in October (see chart above). An HAI of 141.8 means that a family earning the median family income in October ($60,840) had 141.8%% of the income necessary to qualify for a conventional loan (6.23% fixed-rate) covering 80% of a median-priced existing single-family home ($181,800).

Since June 2008 when the HAI was at only 119.3 (due to higher home prices and interest rates, $213,600 and 6.28% respectively), the 22.5 point increase in housing affordability to 141.8 over four months should play an important role in the recovery process for the slumping real estate market. It's the best buyer's market for real estate since at least 2002.

Comment: The NAR's report on housing affordability index released last week received no media attention at all; I couldn't find a single news report on housing affordability reaching a six-year high - shouldn't that be reported? On the other hand, you'll find hundreds of stories on foreclosures and falling home prices. Go figure. Positive, upbeat news doesn't sell as well as gloom and doom? Further, housing affordability will likely surge next month as a result of the recent drastic drop in 30-year mortgage rates to a five-year low of 5.47%.

10 Comments:

At 12/03/2008 11:05 PM, Anonymous Machiavelli999 said...

Why would you listen to the NAR about ANYTHING at all. They are far from a impartial source and have been wrong all the way down the housing crash.

 
At 12/03/2008 11:35 PM, Blogger Mark J. Perry said...

The HAI is a quantitative, mathematical calculation based on: a) median home price, b) median income and c) average mortgage rates, all objective data. What of those measures, or what part of the calculation is based on the NAR's bias or partiality?

 
At 12/04/2008 2:19 AM, Anonymous poor boomer said...

What good is affordability if you can't get a loan?

 
At 12/04/2008 2:25 AM, Anonymous poor boomer said...

p.s. Got any data on rental affordability? In Oregon, one-third of all renters are paying at least half their income for housing; in Portland it's more like one-half.

Isn't it amazing how a sea of housing vacancies can coexist with lack of affordability?

 
At 12/04/2008 3:39 AM, Blogger 1 said...

"In Oregon, one-third of all renters are paying at least half their income for housing; in Portland it's more like one-half"...

How do you know that?

Making the big assumption that what you say is factual then its obvious its time for you to either get out or get a real job...

Oregon Housing and Community Services

 
At 12/04/2008 5:36 AM, Anonymous poor boomer said...

Hmmm, Last spring I attended a city-sponsored event where various local issues were discussed in small groups.

Housing was one of the big issues and someone trotted out a stat sheet prepared by city staff plus some more stats put forth by our bizarre regional government (which tries to plan regional land use and development patterns) known as Metro.

You may have heard of Urban Growth Boundaries in Oregon which draw lines across which new development is not permitted. You can guess what that does to the price of urban land - in Portland, I've seen prices cited of $500K per acre.

According to the July 2007 issue of Apartment Manager, a publication of the (Portland) Metro Multifamily Housing Association (metromultifamily.com), at that time, a 6-percent 2006 rise in residential rents was cited, with a projected further increase of 8.5 percent in 2007 and an additional 6 percent increase in 2008.

I've got some handouts from that event around here somewhere, complete with tables and charts.

If it's time for me to either get out or get a real job, how might I do that? At my age, with my menial dead-end job history, I believe I'm pretty much unemployable these days.

 
At 12/04/2008 8:35 AM, Anonymous Anonymous said...

This affordability relies on unsustainably low interest rates.

 
At 12/04/2008 9:18 AM, Anonymous Anonymous said...

Numbers are actually much better. This is the most attractive affordability since Feb 1994 and the fourth highest on record. It had to get cheap before we could even think about the housing market bottoming. It is cheap now.

 
At 12/04/2008 10:01 AM, Blogger MikeJ said...

Not cheap enough with consumer spending continuing to drop and unemployment continue to rise.

 
At 12/04/2008 2:45 PM, Blogger Patrick said...

I posted this on the next article regarding the HA index, but this area seems to have more traffic. Here are my thoughts on why this is mis-leading...

This, of course, is assuming that:

a) you have your 20% down payment in cash (I'm not sure many people had that much money safely sitting in cash), or

b) the equity in your current house has been preserved and you can sell it to someone in the "a" group.

I'll bet the HA index is still too low to really bring new money into housing. After all, it may be more affordable, but that doesn't imply that it's easier to get financing for the house. Am I way off base here?

 

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