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HOUSING AFFORDABILITY GAINS LINKED TO LOW INTEREST RATES

 HOUSING AFFORDABILITY GAINS LINKED TO LOW INTEREST RATES
 WASHINGTON, Aug. 12 /PRNewswire/ -- Housing affordability conditions for both first-time and repeat buyers posted rousing gains for the second quarter of 1992 compared to the same time last year, according to the National Association of Realtors' first-time home buyer and composite Housing Affordability Indexes released today.
 Although affordability conditions remained ripe during April, May and June of this year, marginal rises in the median price of single family homes continued to thwart the ability of first-time home buyers struggling to raise downpayment funds. NAR President Dorcas T. Helfant noted, "If housing is going to kickstart this economy, government has to provide consumers with the right tools to overcome downpayment barriers - low interest rates alone do not buy a house." The average effective interest rate during 1992 has been 8.41 percent, the lowest since 1973, when a gallon of gasoline cost 38 cents, she added.
 The distinct rise in composite and first-time home buyer affordability indexes compared to a year ago is tempered by an increasing disparity between the two groups. An affordability gap of 35 percent separated the first-time buyer index from the composite index during the second quarter of 1992, while last year the difference was 34.4 percent.
 NAR Executive Vice President Almon R. "Bud" Smith commented: "The affordability index shows progress, but doesn't reveal the frustration felt by many potential first-time home buyers. Our recent homeownership survey shows that three-quarters of current renters are willing to make substantial sacrifices, even postpone retirement, to start climbing the homeownership ladder. Yet almost half cite problems related to downpayment as the reason they remain renters."
 NAR's composite Housing Affordability Index, which measures affordability factors for all home buyers, rated 121.2 for the second quarter of this year, compared to 111.4 in the second quarter of 1991. When the index measures 100, a family earning the median income would have exactly the amount needed to purchase a median- priced resale home, using conventional financing and a 20 percent down payment. Since the median is the midpoint, the composite shows that half the families in the nation had at least 121.2 percent of the income needed to qualify for the purchase of a home with a median price of $103,600, and half did not.
 In comparison, the first-time home buyer index shows the ability of renters who are prime potential first-time buyers to qualify for a mortgage on a starter home. When this index equals 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 this year, the first-time home buyer index measured 78.7, compared to 73.1 for the second quarter of 1991. The first-time index shows that the qualifying income needed for conventional financing covering 90 percent of a $88,100 starter home was $29,833. Yet the median income of prime first-time buyers was $23,485 -- a difference of $6,348 per year.
 Helfant attributes first-time homebuyer difficulties to a hesitant legislative atmosphere. "Attractive interest rates continue to boost trade-up buyer activity as well as first-time buyer curiosity, but if consumers could responsibly apply IRA and 40l(k) funds toward a home purchase, the market would surge. The nation needs pro-consumer policy, not reluctance."
 Under affordability conditions for all buyers during the second quarter of 1992, a family earning $20,000 per year would have sufficient income to qualify for a $68,000 home with a $54,400 loan. A family earning $30,000 would qualify for a $102,000 home using a $81,600 loan. For a family earning $40,000, qualifying for a loan of $108,800 would enable them to purchase a $136,000 home. Finally, a family earning $50,000 annually would be able to buy a $170,000 home after qualifying for a $136,000 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- 8/12/92
 /CONTACT: Scott Sherwood, 202-383-1016, Trisha Morris, 202-383-7560, Annemarie Roketenetz, 202-383-7560, all of the National Association of Realtors/ CO: National Association of Realtors ST: District of Columbia IN: SU: ECO


TW -- DC002 -- 9241 08/12/92 08:45 EDT
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Date:Aug 12, 1992
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