Lower interest rates and home prices are making homes more affordable in every region of the United States, the National Association of Realtors reports.
The group's housing affordability index, which measures the ability of a family earning the median income to purchase a median-priced resale home, was 112.5 in August, up from the revised July index of 109.7.This means that a family earning the national median income of
$36,533 in August had 112.5 percent of the income needed to qualify for conventional financing for a median-priced home. The loan would cover 80 percent of a home priced at $101,800.
The median is the midpoint, meaning half the existing single-family homes sold for more than the median price in August, and half for less. Similarly, half the families in the United States earn more than the median income, and half earn less.
The Realtors group said the typical family in the Midwest and the South had more than enough income to purchase median-priced homes, while typical families in the Northeast and West still did not have enough, but were gaining.
"A decline in the median home price and the mortgage interest rate in August caused a good increase in the index," noted Harley Rouda, president of the National Association of Realtors. "You can't ask for better buying conditions, with interest rates lower than they've been in several years."
Average mortgage interest rates declined to 9.36 percent in August from 9.41 percent in July, according to the Federal Housing Finance Board. The August rate was the lowest since September, 1988, when it was 9.3 percent.
Still, consumers are hesitant to get into the housing market because the economy is still hovering between recession and recovery, Rouda noted. Consequently, the median home price fell by $1,800 between July and August, the Realtors group said.
But Rouda said he is confident home sales will pick up nearer the end of the year, as low interest rates and low inflation continue to bolster the economy.