It Was Tougher to Afford a Home in July, Realtors Say

Homes became less affordable for the average American in July, the National Assn. of Realtors said Friday, adding that higher oil prices due to the Persian Gulf crisis will make the situation worse.

“Home buyers in America will get hit by Iraq’s invasion of Kuwait,” said Norman Flynn, NAR’s president. “First-time buyers will get hit hardest.”

Despite the loss of purchasing power anticipated for August, Flynn did not expect housing affordability to take an extended fall. The NAR is forecasting a decline in mortgage rates for the last quarter of 1990, which should boost buying power.

Families with the national average income of $34,358 had 102.3% of the amount needed in July to qualify for a conventional home loan, the trade group said.

The housing affordability index, which tracks home buying ability, was down from 102.9 in June but ahead of the 99.6% rate recorded in July, 1989.

“Unfortunately, entry-level buyers who might have just qualified to purchase a home in June or July may now find themselves priced out of the market,” Flynn said.

The national median home price--the price at which half the homes cost more and half less--rose $900 to $98,400 from June. That was an increase of $3,200 from a year ago.

Earlier this week, the Commerce Department said sales of new single-family homes fell 2.3% in July, which analysts said reflected growing uncertainty about the U.S. economy even before the Persian Gulf crisis erupted Aug. 2.

Recession worries have increasingly kept home buyers out of the market, analysts said.

Many home buyers looking to boost their purchasing power while rates rise will be drawn to adjustable-rate mortgages, NAR chief economist John Tuccillo said.

“ARMs don’t offer the predictability of fixed-rate loan payments, but they can make the difference between buying and putting it off,” he said.

The interest rate used to compute the affordability index was 10.15% in July, down from 10.16% in June.

However, Freddie Mac, the Federal Home Loan Mortgage Corp., most recently quoted August fixed-rate mortgages at 10.29% and ARMs at 8.36%.