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NAR'S AFFORDABILITY INDEX AT HIGHEST LEVEL IN NEARLY TWO DECADES

NAR'S AFFORDABILITY INDEX AT HIGHEST LEVEL IN NEARLY TWO DECADES
 WASHINGTON, March 2 /PRNewswire/ -- Favorable financing conditions continued to bolster the National Association of Realtors' (NAR) Housing Affordability Index in January, pushing it to the highest level in nearly 18 years, the association reported today.
 NAR President Dorcas T. Helfant said a sharp disparity exists between actual home buying conditions and the market's responsiveness to these conditions. "Even though the recession lingers, incredible home buying opportunities are out there -- stable home prices and very affordable interest rates," she said.
 "If it wasn't for the fact that so many people still feel reticent about the economy, these conditions literally would be opening the door to homeownership for thousands of families and individuals," she added.
 The index, which measures the ability of a family earning the median income to purchase a median-priced resale home, was 124.7 in January, an increase from the revised December index of 123.8. Last month's index improved by more than 13 points from the January 1991 index of 111.3. Not since May 1974, when the index was 128.7, has it been higher than January's reading.
 Helfant said if interest rates remain low, one can expect 1992 to bring another good year of affordability conditions. "Unfortunately, consumers have not gotten over their jitters yet, but as the economy gradually improves this year, confidence will improve, and home sales will undoubtedly pick up," she said.
 The January index shows that a family earning the national median income of $36,742 in January had 124.7 percent of the income needed to qualify for conventional financing covering 80 percent of a home priced at $102,300, the median existing-home price for that month. The median is the midpoint, meaning half the existing single-family homes sold in January 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.
 The interest rate used to compute NAR's Housing Affordability Index 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. While this rate declined to 8.23 percent in early January from 8.51 in December, interest rates in general inched up nearly half a point toward the end of the month, as cited in NAR's January existing-home sales report.
 With interest rates in the single-digit range, purchasing power is stronger than it's ever been, said NAR Chief Economist John A. Tuccillo. "The drop in interest rates in the beginning of January, helped offset an increase in the national median home price. However, because rates crept up toward the end of the month, we expect to see a slight decline in the index next month," he noted.
 When calculated with the board's effective fixed-rate mortgage interest rate of 8.52 percent for January, the index was 121.4. When calculated with the effective adjustable-rate mortgage interest rate of 6.85 percent for January the index was 142.7.
 The median home price increased $2,000, from $100,300 to $102,300 between December and January; the median family income rose $46 from $36,696 to $36,742; and the income needed to qualify for a loan covering 80 percent of the typical home declined $185 from $29,642 to $29,457. Also, the monthly mortgage payment declined $4 to $614 in January.
 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 and making a 20 percent down payment. Because the national median income in January exceeded the qualifying income, a family earning the median income could purchase a home priced at $127,600, $25,300 higher than the median price for January.
 Under January's affordability conditions, a family earning $20,000 would have sufficient income to qualify for a $69,500 home using a $55,600 loan. A family earning $30,000 would qualify for an $104,300 home with a $83,400 loan. A family earning $40,000 would have sufficient income to qualify for a $139,000 home with a $111,200 loan; and a family with a $50,000 income would qualify for a $173,800 home using a $139,000 loan.
 The National Association of Realtors, "The Voice for Real Estate," is the nation's largest trade association, representing more than 750,000 members involved in all aspects of the real estate industry.
 -0- 3/2/92
 /NOTE: Regional housing affordability numbers will be discontinued until further notice due to the unavailability of comparable regional interest rates./
 /CONTACT: Lois Clinton, 202-383-1016, or Cheryl Spector, 202-383-1289, both of the National Association of Realtors/ CO: National Association of Realtors ST: District of Columbia IN: SU: ECO


DC -- DC001 -- 3765 03/02/92 09:01 EST
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Date:Mar 2, 1992
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