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HOUSING AFFORDABILITY INDEX CONTINUES TO CLIMB AS INTEREST RATES DROP

 HOUSING AFFORDABILITY INDEX CONTINUES TO CLIMB
 AS INTEREST RATES DROP
 WASHINGTON, Dec. 2 /PRNewswire/ -- The National Association of Realtors' (NAR) Housing Affordability Index in October climbed to the highest level in nearly 15 years, surpassing the record level set in September. Continued declines in mortgage interest rates and the median home price drove the index up, the association reported today.
 The index, which measures the ability of a family earning the median income to purchase a median-priced resale home, was 118.8 in October, up from the revised September index of 116.3. Last month's index was the highest since March 1977, when it was 120.7.
 Those consumers who are fortunate enough to take advantage of the current home buying conditions -- the lowest interest rates and home prices in years -- have really "struck gold," said 1992 NAR President Dorcas T. Helfant.
 "However, there are many families and individuals who want to buy a home right now, but can't because they don't have a job, or their employment future is uncertain, or they feel insecure about the overall economy," she said. "It is unfortunate because with market conditions at a premium, a home buyer can literally save thousands of dollars," Helfant added.
 The October index shows that a family earning the national median income of $36,473 in October had 118.8 percent of the income needed to qualify for conventional financing covering 80 percent of a home priced at $99,200, the median existing-home price for that month. The median is the midpoint, meaning half the existing single-family homes sold in October for more than the median price and half sold for less. Similarly, half the families in the United States earn more than the median income and half earn less.
 NAR Chief Economist John A. Tuccillo said despite the housing market's lethargy, there are small signs of improvement as evidenced by the increase in existing-home sales and especially housing starts last month. "Signs of life appeared last month in the housing sector, and we expect these to grow. It will be a gradual process, though, before we shake this persistent stagnation period and get back on track," he said.
 The Housing Affordability Index calculated for the four regions of the country improved in every area, except the West during October.
 The typical family in the Midwest region had the most purchasing power of all the regions during October. A family earning the median income in that region had 158.9 percent of the income needed to purchase the median-priced home there last month. In September, the index for the Midwest was 157.0.
 In the South, the typical family also had more than enough income to purchase the median-priced home last month. The index was 121.1 in October, up from 113.9 the previous month.
 In the Northeast, the typical borrower's purchasing power stood at 94.8 in October, an increase from 92.9 in September.
 In the West, a family earning the median income, had 82.8 percent of income needed to buy the median-priced home in October. The index for the West was 83.2 percent in September. Tuccillo said the decline in the index was caused by a fairly significant increase in the median home price in that region last month.
 "By and large, most regions are showing signs of improving housing affordability conditions. For example, in the Northeast during the late '80s, the housing affordability index was in the seventies, and now it has reached the '90s. That is a vast improvement," Tuccillo noted. "Now what is needed to balance the picture is an infusion of jobs and confidence," he added.
 The interest rate used to compute NAR's Housing Affordability Index, which is a composite of closing rates for both fixed-rate mortgages and adjustable-rate mortgages on existing homes, as reported by the Federal Housing Finance Board, declined to 9.02 percent in October from 9.17 in September. The October rate was the lowest since July 1977 when it was also 9.02.
 When calculated with the board's effective fixed-rate mortgage interest rate of 9.41 percent for October, the index was 114.8. When calculated with the effective adjustable-rate mortgage interest rate of 7.68 percent for October, the index was 134.6.
 The median home price declined $500 between September and October; the median family income rose $112; and the income needed to qualify for a loan covering 80 percent of the typical home declined $569. Also, the monthly mortgage payment declined $12 to $640 in October.
 When NAR's affordability index measures 100.0, the median family income equals exactly the amount needed to qualify to purchase a median-priced home, using conventional financing with a 20 percent down payment. Because the national median income in October exceeded the qualifying income by more than $5,000, a family earning the median income could purchase a home priced at $117,800, $18,600 higher than the median price for October.
 Under October's affordability conditions, a family earning $20,000 would have sufficient income to qualify for a $65,000 home using a $52,000 loan. A family earning $30,000 would qualify for a $98,000 home with a $78,000 loan. A family earning $40,000 would have sufficient income to qualify for a $130,000 home with a $104,000 loan; and a family with a $50,000 income would qualify for a $163,000 home using a $130,000 loan.
 The National Association of Realtors, "The Voice for Real Estate," is the nation's largest trade association, representing nearly 800,000 members involved in all aspects of the real estate industry.
 -0- 12/2/91
 /CONTACT: Lois Clinton, 202-383-1016, Rose Matthews, 202-383-1135, or Val Allridge, 202-383-1195, all of the National Association of Realtors/ CO: National Association of Realtors ST: District of Columbia IN: SU: ECO


DC -- DC001 -- 8209 12/02/91 09:02 EST
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Publication:PR Newswire
Date:Dec 2, 1991
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