Data Says: Home Affordability Has Peaked; Real Estate Getting Expensive Again

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Last quarter, as mortgage rates continued to make new, all-time lows through November, home ownership costs fell to their lowest levels in history. Since November, however, it's been a complete 180.

Home Affordability Peaked 4 Months Ago

According to the National Association of Home Builders' quarterly Home Opportunity Index, 73.9 percent of all homes sold between October-December 2010 were affordable to families earning the national median income of $64,400.

It's an all-time high for home affordability and the 8th straight quarter in which home affordability crossed 70 percent; and by way of perspective, prior to 2009, HOI rarely bested 65 percent.

Unfortunately, the data is dated. The Home Opportunity Index doesn't capture the market developments of the last 8 weeks.

For example, last quarter, a combination of sagging home prices and ultra-low mortgage rates combined to put homeownership within reach for more Americans that at any time in history.

This quarter, it's a different story.

Mortgage rates have skyrocketed from November lows and the housing market is showing more consistent gains. Over the last 4 months, home buyers have lost more than 10% of their purchasing power.

Looking back, the HOI is spot-on. Late-2010 was the best time to have bought a home.

Cincinnati, Columbus And Dayton Remain Affordable

Despite rising homeownership costs, though, housing remains affordable by metropolis.

Last quarter, the Goshen/Elkhart region of northern Indiana topped national affordability rankings; 97% of homes were affordable to households earning the median income there.

For larger cities, Indianapolis ranked first in affordability and, overall, the Midwest was well-represented among the report's most affordable cities. Cincinnati, Columbus, and Dayton handily beat the national average, as did other noteworthy mid-sized cities:

• Dayton, Ohio : 90.6 percent
• Harrisburg, Pennsylvania : 89.1 percent
• Ocala, Florida :  88.3 percent
• Cincinnati, Ohio : 84.7 percent
• Columbus, Ohio : 81.3 percent

On the opposite end of the affordability scale, the New York-White Plains, NY-Wayne, NJ region ranked last in home affordability for the 11th straight quarter.

Just 25% of homes there are affordable to families earning the local median income.

The rankings for all 225 metro areas are available online.

Mortgage Rates Up, Home Affordability Down

Regardless of where you live, home affordability is under attack. Mortgage rates are at a 10-month high and loan costs are rising.

It may not always feel like it, but the economy is improving. Home affordability taking a hit.  If your plans call for buying a home in mid-to-late 2011, consider moving up your time frame.

And when the time comes, you'll need a mortgage.by email. Send me bullet points on your plan and I'll put something together for you.