A measurement of U.S. housing affordability slipped in the second quarter, but remained close to its highest level in 25 years, the National Association of Realtors reported.
The association’s composite housing affordability index fell to 131.1 in the second quarter from 134.9 during the first three months of this year. A year ago, the index stood at 125.0.
A rise in home prices led to the decline in the index, the NAR said.
“With more people trading up to more expensive homes, an increase in the median existing-home price offset a modest increase in family income and a slight decline in mortgage interest rates,” said Fred Flick, NAR’s vice president of economic research.
The index shows half of the nation’s households had at least 131.1 percent of the income needed to purchase a median-priced home during the second quarter.
The median home price during the quarter was $131,100.
Even with a decline, overall “housing affordability conditions this year are at their highest level in 25 years,” said NAR President R. Layne Morrill. “The last time we saw affordability sustained at a higher level was in 1973”, he said.
The affordability index averaged 147.9 for all of that year, the NAR said.
Morrill said the association expects the index to average 135.4 this year, “with conditions improving during the third and fourth quarters as interest rates edge down, incomes rise and prices remain fairly stable.”
The average effective mortgage interest rate for existing homes was 7.21 percent during the second quarter, down from 7.22 percent in the first quarter and 7.89 percent in the same quarter a year ago, the NAR said, citing the Federal Housing Finance Board.
The report also showed the association’s affordability index for first-time homebuyers fell to 80.5 in the second quarter from 82.8 in the first quarter. The index was at 76.8 in the second quarter of 1997. That means the typical first-time buyer, between the ages of 25 and 44, had 80.5 percent of the income needed to purchase a first home.
The association’s quarterly index measures housing affordability for all home buyers, with 100 defined as the point where a median-income family has the exact amount of income needed to purchase a median-priced existing home.
