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First Quarter Review: Housing Affordability

First Quarter Review: Housing Affordability

The first quarter of 2012 was a milestone for housing affordability, according to the National Association of Realtors (NAR).

The Housing Affordability Index, which “provides a quick look at affordability and is calculated by the relationship between median home price, median family income and average mortgage interest rate” rose to 205.9 in quarter one of 2012 (National Association of Realtors). This is a record high and the first time since record keeping began in 1970 that the index surpassed 200.

Conditions for those with good credit, housing affordability and opportunities in the market are the best they have ever been. According to the index, “a median-income family, earning just under $61,000, could afford a home costing $325,500 in the first quarter – more than double the national median existing single-family home price of $158,100. The median monthly mortgage principal and interest payment for a median-priced home would take only 13.5 percent of gross income” (National Association of Realtors).

Furthermore, the index that measures first-time home buyers reached a record high of 135.8 in the first quarter of 2012.  This index makes a few assumptions:

  • Buyers have a lower income
  • At 65% of median family income
  • A starter home costing 85% of the median price
  • A 10% downpayment

For the first quarter, this index revealed that first-time home buyers could afford a home costing $182,500– an average above the median price.

According to NAR President, Moe Veissi, “It’s never been easy to buy a first home because of the cash required for downpayment and closing costs, but conditions for first-time buyers who are able to get a mortgage have never been better.”

Often times, first-time home buyers opt for a loan that offers a lower downpayment, while many choose an FHA loan with a 3.5 percent down, and some even chose the VA program with no downpayment.

The National Association of Realtors expects that home prices and mortgage interest rates will increase modestly throughout the year, but “housing affordability will remain very favorable with the median-income household well positioned to afford a median-priced home.”

The results yielded from the index demonstrates desirable conditions for home buyers in the first quarter. If things stay on the same track in quarter two and throughout the rest of 2012, the housing market could rebound at an even faster rate. As buying conditions improve, we should see an even greater increase in home prices, while the number of available homes should continue to decline. It is likely that buyers will continue to become more aggressive as affordability remains favorable– and this is encouraging news for Southwest Florida.

If you have interest in property on Florida’s Gulf Coast, please click here, Southwest Florida Real Estate For Sale. For more information on a specific property, please contact Jim Mulligan, Suncoasteam Realty at 941-235-7474 or jim@suncoasteam.com.

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