Housing Affordability — Take Advantage of Affordable Homes

Published by nora | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Mortgage / Finance, Real Estate

Nationwide, housing affordability is still at a high level. Prospective home buyers are still at the point in time that home prices are at their lowest levels in U.S. history, in relation to median income.

In April this year, the housing affordability index as compiled by the National Association of Realtors is 184.9. What does this figure mean? It means that a median-income-earning family has 184.9 percent of the needed income to buy a median-priced single-family home with 20-percent down payment. That’s nearly double the ability to buy.

That’s also much higher than 100. A housing affordability index of 100 means that a family earning the median income has the exact income level to afford a median-priced single-family home. An index of 110 means a median-income-earning family has 10 percent more of the required financial capability to buy a median-priced home.

The home affordability index of 184.9 is definitely much higher than the index in 2008, which was 137.8. Years before the housing meltdown, home prices shot up to levels where large numbers of prospective buyers could not afford to buy. From 137.8, the index increased to 169.4 in 2009, the year bargain foreclosures were everywhere.

Since 2008, the highest level of housing affordability was last year, in February, when the index was 193.2. That’s the closest the index got to 200, which is double the normal index of 100.

Home affordability can also be indicated by the extent monthly home loan payment is impacting monthly income. If mortgage payment is taking half of one’s monthly income, then housing is certainly not affordable.

According to NAR, in April this 2011, monthly mortgage payment was taking 13.5 percent of monthly income, certainly showing home affordability, when compared to 18.1 percent in 2008 and to numbers beyond 50 percent, which were prevalent in major cities before the downturn. In those years, monthly mortgage payments were taking 60 percent of monthly income in expensive cities such as San Francisco and New York.

By simply looking at the national median prices of existing single-family homes over the years and months also gives us ideas on housing affordability. The national median price was $163,200 in April 2011, lower by 16.7 percent than the median price of $196,600 in 2008.

The most affordable region is the Midwest, with an April 2011 home affordability index of more than double, which is 225.7. Next is the South, with a housing affordability index of 186.

In Tampa, the home affordability is evident in the median sales price for homes. As of May 11, 2011, the median sales price is $95,500. To take a look at beautiful and affordable Tampa homes and other types of Tampa real estate, contact the friendly Tampa4U professionals.