Buyers enjoyed unprecedented buying power last year, according to the National Association of Realtor’s Housing Affordability Index. Cruising past 2011’s record figure of 186, the index is expected to reach an all-time high of 194 for 2012.
The index tally is actually a percentage relating specifically to median-priced, existing single-family homes. A score of 100 would mean that median-income families had exactly enough money to buy a house meeting those criteria. The 194 figure indicates that median-income families had 192 percent of the income necessary to purchase one of those homes.
Housing Affordability Index At Record High
Despite the record high, Lawrence Yun, chief economist at NAR, says that would-be homebuyers were unable to take full advantage of the situation and lock in generational low interest rates. He said that excessively tight underwriting was the culprit but, while the index is predicted to drop to 160 in 2013, qualified buyers will still have a great opportunity to purchase a home this year.
“Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income,” Yun said. “A window of opportunity remains open for buyers who can qualify for a mortgage.”
Other key points:
- Rising incomes are expected to be offset by higher prices and mortgage rates but 2013 should still be the third highest year since records were first kept in 1970.
- Prospective buyers in the Midwest enjoy the greatest buying power of any region in the country, and while there is considerable regional variation, median-income families should find themselves in a favorable position in 2013.
Gary Thomas: Housing Market Could Use a Boost
Gary Thomas, NAR president, says that changes to bank and regulatory policies could help bolster the market.
“A more sensible lending environment that makes it easier for other financially qualified buyers to get a mortgage would allow many more households to enter the market, boosting home sales as much as 10 to 15 percent,” Thomas said.