Rising Rates Lower Home Affordability Index : Housing: Despite drop for second straight quarter, figure remains at ‘healthy level.’

Rising mortgage rates trimmed the ability of the typical American family to buy a previously owned home from April through June for a second straight quarter, a real estate trade group reported Tuesday.

The National Assn. of Realtors said its housing affordability index measured 131.2 during the second quarter, down from 140.6 in the previous three months.

Still, the group said affordability remained at “a healthy level,” only slightly below the 133.1 index reading a year earlier.

When the index measures 100, a family earning the national median income has exactly the amount needed to purchase an existing home at the national median price, using conventional financing and a 20% down payment. Thus, as the index goes up, a family has more than enough money to buy at the median price, making the house more affordable.

Because the median is the midpoint, the composite index for the April-June quarter meant half of American families had at least 131.2% of the income needed to qualify for the purchase of a median-priced home costing $110,600.

In fact, because the median family income was $38,651, the typical family could afford a $144,900 home.

The index reached its recent peak of 141.9 in the final three months of 1993, the second-highest level since it hit 145.1 in the second quarter of 1973. But mortgage rates began to spurt early this year, following Federal Reserve Board moves to boost short-term rates as a hedge against inflation.

Rates averaged 7.42% in the second quarter, up from 6.91% in the January-March quarter and 7.26% for the same period last year, according to the Federal Housing Finance Board.

An index measuring the purchasing power of first-time home buyers also fell for a second straight quarter, down to 85.3 from 91.4 in the January-March period, the realtors group said.

The first-time index shows the ability of renters who are prime first-time buyers to qualify for mortgages on starter homes. When it equals 100, the typical buyer can afford a typical starter home under existing financial conditions with a 10% down payment.

In the second quarter, the qualifying income needed for conventional financing covering 90% of a median-priced $94,000 starter home was $28,868.