Despite Low Mortgage Rates, Home Affordability Falls To 12-Month Low
Home Affordability Slips Nationwide
Tuesday, the National Association of Home Builders released its Housing Opportunity Index for 2012's second quarter.
The HOI is a home affordability gauge, tracking median home prices across 225 metropolitan areas, and comparing them to the given area's median household income.
An "affordable" home is one for which monthly mortgage payments -- assuming a 10% downpayment and a 30-year fixed rate mortgage -- would be 28% or less of a median income-earning household's monthly income.
In Q2 2012, 73.8 percent of U.S. homes were affordable for households earning the national median income of $65,000, marking the 17th straight quarter during which home affordability topped 70%.
That said, last quarter's reading is a step back from recent results, a nod to rising home prices in 92% of NAHB's tracked U.S. markets.
Here's how the Home Opportunity Index has read since last year :
- Q3 2011 : 72.9 percent
- Q4 2011 : 75.9 percent
- Q1 2012 : 77.5 percent
- Q2 2012 : 73.8 percent
Despite falling mortgage rates, it's less affordable to buy a home today than during any period in the last 12 months.
Ohio : Home To #1 And #2 Most Affordable "Major Markets"
Home affordability varies by area and for major metropolitan areas, Ohio tops the nation.
The Youngstown, Ohio area was ranked as as the most affordable major metro area last quarter with 93.4% of all homes sold were affordable to families earning the area's median income of $55,700. Dayton, Ohio ranked #2 with 92.0% of all homes sold last quarter were affordable to families earning the area's median income of $63,300.
The other top 5 major market cities include Buffalo, New York; Indianapolis, Indiana; and Modesto, California.
Meanwhile, at the other end of the affordability spectrum, for the 17th consecutive quarter, the New York-White Plains-Wayne, New York-New Jersey area ranked as the least affordable major metropolitan area.
Just 29.4% of families earning the area's median income of $68,300 can afford to buy homes there. This includes all 5 New York boroughs -- Manhattan, Brooklyn, Staten Island, Bronx and Queens.
The least affordable "small market" city was Ocean City, New Jersey.
For "Great Deals" In Housing, The Door Is Closing
For many months, the combination of falling home prices and falling mortgage rate brought home affordability to an all-time high. Now, that trend is reversing.
Since October 2011, home prices have been slowly and steadily rising nationwide, and since the start of August, mortgage rates have done the same. It's getting tougher to find "great deals" in housing. Affordability wanes month by month by month.
If you're a home buyer today, take note of the changing market. Low downpayment programs remain available, but monthly payments are beginning to rise. Consider writing that offer sooner rather than later. The longer you wait, the more it might cost you.