US October Housing Affordability Surges To Highest Level Since 2002

According to the National Association of Realtors (NAR) most recent report, the housing affordability index (HAI) reached a six-year high of 141.8 in October (see chart above). An HAI of 141.8 means that a family earning the median family income in October ($60,840) had 141.8%% of the income necessary to qualify for a conventional loan (6.23% fixed-rate) covering 80% of a median-priced existing single-family home ($181,800).

Since June 2008 when the HAI was at only 119.3 (due to higher home prices and interest rates, $213,600 and 6.28% respectively), the 22.5 point increase in housing affordability to 141.8 over four months should play an important role in the recovery process for the slumping real estate market. It’s the best buyer’s market for real estate since at least 2002.

Comment: The NAR’s report on housing affordability index released last week received no media attention at all; I couldn’t find a single news report on housing affordability reaching a six-year high - shouldn’t that be reported? On the other hand, you’ll find hundreds of stories on foreclosures and falling home prices. Go figure. Positive, upbeat news doesn’t sell as well as gloom and doom? Further, housing affordability will likely surge next month as a result of the recent drastic drop in 30-year mortgage rates to a five-year low of 5.47%.

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