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Housing Affordability Hits Highest Level in History

by Chicago Agent

By Tara Steele, AGBeat.com

Economic indicators show housing is improving, and while recovery is not necessarily imminent, housing affordability conditions have reached the highest level since recordkeeping began in 1970, according to the National Association of Realtors’ (NAR) Housing Affordability Index (HAI).

NAR determines affordability by measuring the relationship between median home price, median family income and average mortgage interest rates. “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,” NAR notes.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said this latest data underscores buyer opportunities in today’s market. “This is the first time the housing affordability index has broken the 200 mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” he said. “Now is a very good time to become a homeowner.”

NAR projects the affordability index for all of 2012 will be at an annual high, with little movement in mortgage interest rates or home prices during the year.

“Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi 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.”

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