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 WASHINGTON, Aug. 10 /PRNewswire/ -- The purchasing power of both first-time and repeat home buyers continued to improve during the second quarter of 1993, resulting in the fourth consecutive quarterly advancement over the past year, according to the Housing Affordability Indexes released today by the National Association of Realtors (NAR).
 Economic conditions affecting all home buyers are measured by NAR's Composite Housing Affordability Index, which was 132.6 for the second quarter of 1993, compared to 118.9 for the same time period last year. The current quarterly figure is the highest posted since the fourth quarter of 1973, when the composite index measured 137.2.
 When the index measures 100, it means a family earning the median income has exactly the amount needed to purchase a median-priced resale home, using conventional financing and a 20 percent down payment. The median is the midpoint, meaning half would have at least 100 percent of the income needed to qualify for the purchase of a median priced home, and half would not.
 The current composite index and supporting figures show that half the families in the nation during April, May and June of this year had at least 132.6 percent of the income needed to qualify for the purchase of a home listed at the median price of 107,000 -- and half did not.
 "The economic conditions for purchasing a home have been improving steadily for one year now. With the lowest interest rates in two decades, a recovering economy, and healthy home sales, this is the time for consumers to be in the market," said NAR President William S. Chee.
 Another NAR index shows the ability of the rental population, prime candidates for first-time home purchases, to qualify for a mortgage on a starter home. When the first-time home buyer index registers 100, the typical first-time buyer can afford the typical starter home under existing financial conditions. The first-time buyer median income represents the typical income of a renter family with wage earners between the ages of 25 and 44 years.
 During the second quarter of 1993, the affordability index for first-time home buyers reached 86.7, compared to 78.5 during 1992's second quarter. Like the composite index, this index also experienced its fourth consecutive quarterly rise over the past 12 months.
 The first-time buyer index shows that the qualifying income needed for conventional financing covering 90 percent of a $91,000 home during the second quarter of 1992 was $27,514. Yet the median income of prime first-time buyers was $23,861, a difference of $3,653. Additionally, the gap in affordability between repeat and first-time home buyers during the second quarter of 1993 measured 34.6, compared to 1992's second quarter gap of 34.0.
 While median incomes for both first-time and move-up buyers have increased, thereby contributing to overall affordability, the influence of low interest rates has had an even greater positive influence on home purchases.
 According to NAR Chief Economist John A. Tuccillo, repeat buyers typically have a financial advantage over first-time buyers. "Trade-up buyers have the advantage of investing their equity into another home, while first-time home buyers still have to figure a way of crossing a difficult threshold of home ownership -- the down payment. The good news, however, is that a first-time buyer can consult a realtor about home financing that requires lower down payments, such as Federal Housing Administration and state housing finance programs," Tuccillo added.
 According to the Federal Housing Finance Board, the national average effective mortgage rate, which measures the weighed average of adjustable and fixed-rate mortgages on loans closed on existing homes, was 7.26 percent during the second quarter of 1993, compared to 8.46 percent in the second quarter of 1992. The effective interest rate has not been so low since 1968, when the annual effective rate was 7.03 percent.
 Under current affordability conditions for all buyers during the second quarter of 1993, a family earning $20,000 per year would have sufficient income to qualify for a $76,300 home with a $61,000 loan. A family earning $30,000 would qualify for a $114,400 home using a $91,500 loan. For a family earning $40,000, qualifying for a loan of $122,000 would enable them to purchase a $152,500 home. Finally, a family earning $50,000 annually would be able to buy a $190,600 home after qualifying for a $152,500 loan.
 The National Association of Realtors, "The Voice for Real Estate," is the nation's largest trade association, representing nearly 750,000 members involved in all aspects of the real estate industry.
 -0- 8/10/93
 /CONTACT: Scott Sherwood, 202-383-1016, Trisha Morris, 202-383-7560, Annmarie Roketenetz, 202-383-7560, all of the National Association of Realtors/

CO: National Association of Realtors ST: District of Columbia IN: CST SU: ECO

DC-KD -- DC002 -- 1048 08/10/93 08:47 EDT
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Publication:PR Newswire
Date:Aug 10, 1993

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