NAR says rising incomes, lower home prices and mortgage rates underpin affordability conditions. May 3, 2004: 10:29 AM EDT
NEW YORK (CNN/Money) – Rising incomes, a slight pull-back in home prices and low mortgage interest rates boosted housing affordability conditions in the first-quarter, an industry trade group said Monday.
"Although mortgage interest rates have risen in the last month, housing affordability conditions remain favorable," said David Lereah, chief economist for the National Association of Realtors.
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"There are some challenges in the more expensive markets, but on balance most of households in the United States can readily afford a typical home."
NAR's composite Housing Affordability Index rose to 144.1 during the first-quarter from 138.7 the previous quarter, but dipped slightly from a year-earlier level of 144.9. Any score above 100 means generally favorable conditions exist.
The index measures affordability for all homebuyers making a 20 percent down payment, with an index of 100 defined as the level where a median-income family, earning $54,517, has the exact amount of income needed to purchase a median-priced existing home. The median existing home price is $170,800.
The Federal Housing Finance Board says the average mortgage interest rate for existing homes was 5.64 percent during the quarter, down from 5.83 in the previous quarter and 5.90 percent during the year-earlier period. These figures do not account for the recent rise in interest rates.
Current Mortgage Rates
Type
Overall avgs
30 yr fixed mtg
6.51%
15 yr fixed mtg
6.04%
30 yr fixed jumbo mtg
7.49%
5/1 ARM
5.97%
5/1 jumbo ARM
6.35%
The First-Time Homebuyer Affordability Index shows a typical first-time buyer household—those aged 25 to 44 with an annual income of $30,980—had 83.4 percent of the income needed to purchase a typical starter home with a 10 percent down payment. First-time buyers could afford a home costing $121,100 but the median price was $145,200.
"Although it's usually a challenge to buy your first home, there are more state and local programs today that are targeted to help entry-level buyers," Walt McDonald, NAR president and broker-owner of Walt McDonald Real Estate, said.
