Gino Blefari, President & CEO of Silicon Valley based real estate company Intero Real Estate Services, explains the housing affordability index and why now is the time to buy in his recent blog post Housing Is At Its Most Affordable in 20 Years:
As far as real estate statistics go, one of the most useful and interesting is the housing affordability index. What good are sales numbers and prices if not put into context? The affordability index provides that context, telling us the percentage of homes in a given location that a family earning an average income can afford – by traditional standards.
The Housing Opportunity Index released earlier this month by the National Association of Home Builders and Wells Fargo shows that housing affordability was near its highest level in 20 years in the third quarter. A near-record 72.9% of all new and existing homes sold during this time were affordable to families earning the national median income of $64,200.
What’s fueling this feel-good statistic are major price drops in markets across the country and record low interest rates: two factors that obviously bode well for home buyers (especially first-time home buyers who aren’t depending on the same market conditions to sell a house). Interest rates on a 30-year fixed mortgage are still hovering around 4.2%, which means borrowing is cheap by historic standards. And while prices have stabilized in some markets, they’re still much lower on average nationwide than they were five years ago.