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Home Affordability Remains High For Your Buyers

January 21, 2013
From Loan Officer John Hendley

From Loan Officer John Hendley

Good news continues on the “home” front, with new data that shows real estate is at record affordability!

The National Association of Realtors (NAR) reported that as of November, its most recent data, the index was at 198. Once December 2012 numbers are calculated, it’s projected to end the year at 194, up substantially from a high of 186, the record set in 2011. What does this index mean?

NAR looks at the relationship between the buyer’s median income, the median home price, and the average mortgage interest rate. An index of 100 is the point where buyers can afford a median-priced home, assuming 20% down and a mortgage principal and interest payment of 25% of monthly income. An index below 100 indicates lower buying power, above 100, greater buying power.

So, will this positive news continue on into 2013?

Experts believe houses will remain affordable, but gradually rising interest rates and home prices may minimize buying power a bit this year. It’s projected that the index will settle in at 160 for 2013, which means home buyers will have about 160% of the income they need to buy a median priced home according to the criteria above.

Do you have buyers who are on the fence, holding back because of economic uncertainty? You may want to share these numbers with them. They may not realize how far their housing dollars can go – and what an opportunity it is to buy now.

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