Home prices are going up but what about home affordability? With prices on the rise can buyers still buy homes?
The Housing Affordability Index says, yes, buyers can still afford homes. The index actually shows that even though home prices have increased, homes were actually more affordable to families in August 2012 than they were in August 2011!
How can this be? Pretty simple – prices are up but interest rates are down around 1% and incomes are up. The Housing Affordability Index uses price, income and mortgage rate to calculate the affordability using nationwide median figures. At 185.0, the Housing Affordability Index shows that the median income family earns 85% more than the income needed to qualify to purchase the typical home that was sold in August. Regionally, home affordability is improved over one year ago in every area except the West, where the more than 15% year-over-year price gain offset more moderate income gains and the benefit of lower mortgage rates. Still, even in the West, the median income family earns at least 40% more than is needed to qualify to purchase the median priced existing home.