Housing Affordability Record

The final report from the National Association of Realtors® (NAR) shows record high housing affordability conditions for metropolitan real estate markets nationally in 2012.

The NAR presents the affordability data in its annual national Housing Affordability Index (HAI).  According to the NAR, the index is “is calculated on the relationship between median home price, median family income and average effective mortgage interest rate.”   Record keeping for this index began in 1970, and as the index increases it reflects a stronger household home purchasing power.

An index rating of 100 is defined by the NAR as the point at which a median-income household has exactly enough income to qualify for the purchase of a median priced home.  This assuming that no more than 25 percent of the gross income is used for mortgage principal and interest payments, and also assuming a 20 percent down payment.

The NAR Housing Affordability Index for 2012 was listed at 193.5; this is up from an affordability index of 186.4 in 2011.  The 2012 index was a new record.  For buyers not making the 25 percent of gross income and 20 percent down payment markers, their affordability levels will be lower.

NAR chief economist, Lawrence Yun, says that the index for 2012 shows that “the national median income of families was almost double the income needed to buy a median-priced home in 2012.”  He goes on to say that this enables most buyers to easily stay within their financial budget for a home purchase.  He projects that the index will average 161 throughout 2013, making home purchase affordability “very favorable.”  If his projections hold true, he says it will be the third best on record.

According to the NAR, There were 145 out of 156 metros that set records for housing affordability in 2012.