NAR’s home affordability index shows first-time buyers now have enough income for entry-level purchase.
A three-year low in mortgage rates is making it easier for Americans to afford homes even as property prices increase, according to a report Wednesday from the National Association of Realtors.
An index measuring home affordability for first-time buyers rose to 107.3 from 96.3 a year earlier. A reading of 100 means the household median income is exactly enough to buy the median-price starter home. A broader index that measures the overall market, not just entry-level buyers, rose to 162.9 from 145.7 a year earlier.
Americans trying to buy homes have been challenged with a shortage of available properties and prices that have increased at a faster pace than incomes. Cheaper financing lowers their monthly payments, making it easier to purchase properties.
The median price of a starter home was $233,800 in the fourth quarter, up 6.6% from a year earlier, according to the NAR data that went into the index calculations. The median household income for families buying their first homes gained 3.4% in the same period.
The average rate for a 30-year fixed mortgage was 3.76% in the fourth quarter, according to NAR. That compares with 4.95% in the year-earlier period.
The rate probably will average 3.7% in the current quarter, and stay at that level until the third quarter when it likely will bump up to 3.8%, NAR said in a forecast last month. That will boost home sales to 5.52 million in 2020, a gain of 3.4% from 2019, NAR Chief Economist Lawrence Yun said in an interview.
“The low mortgage rates are clearly helping the market conditions,” Yun said. “Home prices consistently rising at a faster pace than people’s income growth has hurt, but because of the historically low rates, it’s providing marginal opportunities for first-time buyers.”
The average U.S. rate for a 30-year fixed mortgage last week fell to a three-year low of 3.45%, according to Freddie Mac. That was the lowest since 3.42% in the first week of October 2016 and almost a full percentage point below the 4.41% recorded a year earlier.
Sotheby's International Realty ® is a registered trademark licensed to Sotheby's International Realty Affiliates, Inc. This Web site is not the official Web site of Sotheby's International Realty, Inc. Sotheby's International Realty, Inc. does not make any warranty regarding any information, including without limitation its accuracy or completeness, contained on this site. Equal Housing Opportunity. Visit Sotheby's International Realty
Design By SantaFeWebDesign.com