THE ECONOMY : More Qualify to Buy Homes
The typical family’s ability to buy a home rose to its highest level in more than 14 years in October, but the sluggish economy probably impeded sales, a real estate trade group said Monday.
The National Assn. of Realtors said lower mortgage interest rates and lower prices led to a greater ability to buy an existing home in the Midwest, Northeast and South.
Affordability slipped slightly in the West, however, because of a fairly substantial increase in the median price of a home there, according to John A. Tuccillo, an association economist.
“There are many families and individuals who want to buy a home right now but can’t because they don’t have a job, or their employment future is uncertain or they feel insecure about the overall economy,” said Dorcas T. Helfant, the trade group’s incoming president.
The association said its housing affordability index was 118.8 in October, up from 116.3 in September and the highest since the 120.7 of March, 1977.
The October reading meant that a family earning the national median income of $36,473 had 118.8% of the income needed to qualify for conventional financing covering 80% of a median-priced home costing $99,200.
The median means that half the incomes were more and half less, or that half of the homes cost more and half less.
The interest used to compute the index is a composite of closing rates on both fixed-rate and adjustable-rate mortgages on existing homes, as reported by the Federal Housing Finance Board. It was 9.02% in October, down from 9.17% the previous month.
At the same time, the median price of a home fell $500 from September, while the median income rose $112.
The differences meant that the income needed to qualify for an 80% loan declined by $569, while the monthly mortgage payment slipped $12 to $640.
Despite economic concerns, Tuccillo said there were signs of improvement in the housing market, including sales of existing homes and housing starts in October.
“Signs of life appeared (in October) in the housing sector, and we expect these to grow,” he said. “It will be a gradual process, though, before we shake this persistent stagnation period and get back on track.”
The affordability index was up 7.4 percentage points in the South, 4.8 percentage points in the Northeast and 2.3 percentage points in the Midwest, but down 0.5 percentage point in the West.
As usual, families living in the Midwest had the most purchasing power. A family earning the median income of $37,636 had 158.9% of the income needed to purchase a median-priced home costing $76,800.
A family in the South, where the median income was $32,811, had 121.1% of the income needed to buy a median-priced home costing $88,200.
In the Northeast, the index was 94.8. That meant that a family earning $42,373 had 94.8% of the income needed to purchase a median-priced home costing $136,700.
The index was 82.8 in the West, meaning that a family with an income of $37,910 had only 82.8% of what was needed to buy a median-priced home costing $147,600.
In October, a family earning the national median income of $36,473 had 118.8% of the income needed to qualify to buy an existing home. July: 108.9 Oct.: 118.8
Source: National Assn. of Realtors