NAR: Home Affordability Increases Nationwide

by devteam February 9th, 2012 | Share

As prices continued to decline duringrnthe fourth quarter of 2011 in most metropolitan areas of the U.S., housingrnaffordability rose due not only to the lower prices but also because of recordrnlow interest rates.  The NationalrnAssociation of Realtors® released its Housing Affordability Index (HAI) includingrna new annual metro-level housing affordability index which shows historicallyrnfavorable conditions dominating across the country. </p

The median price of an existing single-familyrnhome rose in 29 out of 149 metropolitan statistical areas (MSAs) in the fourthrnquarter compared to the fourth quarter of 2010. rnPrices were unchanged in two MSAs and fell in 118.  The national median existing home price wasrn$163,500 in the fourth quarter compared to $170,600 one year earlier, arndecrease of 4.2 percent.  Distressedrnhomes – foreclosures and short sales – sold for discounts averaging 15 to 20rnpercent and represented 30 percent of total sales compared to 34 percent duringrnthe same quarter of 2010.  The medianrnprice of a condo was $160,800, down 1.7 percent from one year earlier. </p

Thernnational HAI rose to a record high 184.5 in 2011.  The Index base of 100 is defined as the pointrnwhere a median-income household has exactly enough income to qualify for arnmedian priced existing home with a 20 percent down payment and 25 percent ofrnthe income devoted to mortgage principal and interest payments.  The higher the index, the greater thernhousehold purchasing power.  Forrnfirst-time buyers making small downpayments, the affordability levels arernrelatively lower.</p

Existingrnhomes sales, including single-family houses and condos, increased 5.9 percentrnto a seasonally adjusted annual rate of 4.42 million compared to 4.17 millionrnin the third quarter.  This was 9.2rnpercent above the 4.04 million pace one year earlier.  </p

Inventoriesrnof existing homes fell 21.2 percent over the period between Q4 2010 and Q4 201,rndropping from 3.02 million homes for sale to 2.38 million </p

Thernshare of all-cash home purchases in the fourth quarter was 29 percent, unchangedrnfrom the third quarter and up one percentage point from the fourth quarter ofrn2010.  Investors, who are largely the all-cash purchasers, accounted forrn19 percent of home sales in the third quarter virtually unchanged from the twornearlier reporting periods. First-time buyers purchased 33 percent of homes inrnthe fourth quarter again nearly unchanged from earlier quarters. </p

Salesrnrose in all four regions both from third quarter figures and those of one yearrnearlier, but prices declined.  Thernlargest annual increase in sales was in the Midwest where sales were up 14.1rnpercent from Q4 2010. Quarter-over-quarter sales were up at least 3.8 percentrnin every region with the West showing the greatest increase at 8.1 percent.  Median prices now range from $134,100 in thernMidwest to $229,200 in the Northeast.  .  </p

Lawrence Yun, NAR chief economist, said the figures reflect greater homernsales activity at lower price points.  “Sales have risen strongly inrnlower price ranges from one year ago, while sales at the upper end remainrnsluggish,” he said.  “More importantly, we’re seeing a consistent trend ofrndeclining inventory, which means supply and demand conditions are becoming morernbalanced in more areas, which will help stabilize home prices.”</p

Metrornareas with the greatest housing affordability conditions in 2011 include thernDetroit-Warren-Livonia area of Michigan, with an index of 383.4; Toledo, Ohio,rnat 242.9; and Decatur, Ill., at 236.8.  Only 24 out of 152 metros measuredrnhad an affordability index below 100 in 2011.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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