Affordability of Homes Nationwide Rises

U.S. housing affordability rose in the last three months of 2003, reversing two quarters of declines, as the cost of homes dipped by more than $5,000, the National Assn. of Realtors said Monday.

The group’s housing affordability index increased to 139.2 from 136.6 in the previous quarter. A reading of 100 means a household with the national median income makes exactly enough to pay for a median-priced home, and a higher reading indicates houses are more affordable.

Home prices typically fall in the fourth quarter as families with children decide to stay where they are, said David Lereah, chief economist for the Realtor group. The median U.S. home price has fallen every fourth quarter for the last 20 years, with the exception of 2002 when it rose 0.2%, he said.

“A softening in home prices really helped in terms of affordability in the closing months of 2003,” Lereah said.

The index reached a 30-year high of 144.1 in the first quarter of 2003 and fell to 143.8 in the second quarter.

The price for an existing single-family home fell to $171,600 in the last three months of the year from $176,900 in the third quarter. Measured year over year, the industry’s standard, price growth slowed to 6.6% from 10%.

The appreciation rate probably will slow to 4.6% this year, Lereah said. Over the last 20 years, the rate averaged 4.5%.

The interest rate for a 30-year fixed mortgage averaged 5.83% in the last three months of 2003, compared with 5.66% in the prior quarter, the NAR report said.