CoreLogic’s Home Price Index, the measure of home values that is used by the Federal Reserve in its economic research, might have fallen for the sixth straight month in January, but it also contributed to what the National Association of Realtors (NAR) has reported as the most affordable housing market in its history of record-keeping.
The price declines were not even that damaging, relatively speaking. Prices were down 1.0 percent from December to January, and, excluding distressed sales, were down just 0.9 percent from January 2011.
Mark Fleming, the chief economist for CoreLogic, said that the recent declines have brought prices down to their lowest level in a decade.
“Although home price declines are slowly improving and not far from the bottom, home prices are down to nearly the same levels as 10 years ago,” Fleming said.
And those price declines have made homes affordable on a historical level. The Housing Affordability Index from NAR rose to 206.1 in January, the highest level since NAR began tracking affordability in 1970.
An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. Moe Veissi, NAR’s president, said the latest data goes far beyond those base models.
“This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” Veissi said. “For buyers who can qualify for a mortgage, now is a very good time to become a homeowner.”
Veissi also said that if market conditions cooperate, activity in housing could be very promising in 2012.
“Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” he said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”
Expect affordability to continue its ascent through 2012; with little projected change in interest rates and home values in 2012, NAR predicts its index will only increase in the coming months.