Real estate is definitely local, but understanding what is happening at a national level is important too. The National Association of Realtors (NAR) President and Leadership Team work diligently on issues that matter to REALTORS® and home owners. One index they use to assess the health of the real estate market is the Housing Affordability Index.
NAR’s national annual Housing Affordability Index, established in 1970, rose to a record high 193.5 in 2012 from 186.4 in 2011.
The index is calculated on the relationship between median home price, median family income and average effective mortgage interest rate. An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. The higher the index, the stronger the household purchasing power.
Let’s look at the index for the Boulder, CO area
2009 – 118.4
2010 – 119.7
2011 – 134.8 (12.6% increase from 2010)
2012 – 141.3 (4.9% increase from 2011)
You can get the full list for theAffordability Index of Existing Single-Family Homes for Metropolitan Areas
“The housing affordability index shows that the national median income of families was almost double the income needed to buy a median-priced home in 2012, so most buyers are able to stay well within their means,” Yun said. Lawrence Yun is the NAR chief economist. Despite rising prices the index is expected to average 161 in 2013, which would be the third best on record. Is it time for you to get a home?
To read more about the latest housing news go to Fourth Quarter Metro Area Home Prices Show Strongest Performance in Seven Years on the NAR web site..