WASHINGTON, July 18-Favorable financing conditions and higher incomes helped make it considerably easier for American families to afford homeownership in this year's first quarter compared to the same period one year ago, according to the National Association of Home Builders' Housing Opportunity Index (HOI), released today.
"Nearly 65 percent of all new and existing homes sold in this country in January through March of 2002 were affordable to families earning the national median income of $54,400," said Gary Garczynski, NAHB president and a builder/developer from Woodbridge, Va. "That's up substantially from 56.9
percent in last year's first quarter, and up a notch from the 64.1 percent of homes affordable at the end of 2001."
"Clearly, this improvement opened the door to homeownership for thousands
more Americans, boosting housing's contribution to Gross Domestic Product at
a crucial time for the nation's economy," Garczynski noted. "Every home that
is sold generates thousands of dollars in home-related purchases during the
first year of ownership."
Garczynski added that, despite the latest good news, the country still confronts a housing affordability crisis in which millions of Americans - particularly minority and low-income citizens - remain beyond the reach of homeownership. "We applaud President Bush's recently announced initiative to
address this critical problem, and look forward to working with the administration and Congress to lower the barriers to homeownership for all Americans," he said.
The HOI is a measure of the percentage of new and existing homes sold that a
family earning the median income can afford to buy. The latest index, with a reading of 64.8, was based on an analysis of more than 580,000 completed
home sales in 191 metro markets nationwide. This was up from a 64.1 reading in last year's final quarter and from a 56.9 reading in the first quarter of 2001.
The year-over-year comparison is especially relevant because it reflects a
significant rise in annual household incomes, which are calculated by the Department of Housing and Urban Development (HUD) annually at the beginning of each year. The national median family income used to compute the HOI throughout 2001 was $52,500. In 2002, the official median U.S. household income is $54,400 - up 3.6 percent from 2001.
Another major factor behind the improved affordability was interest rates.
In this year's first quarter, the average weighted interest rate (on adjustable and fixed-rate mortgages) was 6.86 percent, down substantially from the 7.21 percent average in 2001's first quarter. Interest rates rose slightly this time as compared to the final quarter of 2001, when they averaged 6.71 percent, but affordability improved anyway, due primarily to higher incomes.
In this year's first quarter, Elkhart-Goshen, Ind. made its first appearance
at the top of the affordability chart since 1995. With an HOI of 94.9, nearly 95 percent of homes sold in Elkhart-Goshen were affordable to families making that area's median income of $59,300. On the flip side of the coin, Salinas, Calif., was the least affordable metro area with an HOI of 7.7. This means that fewer than 8 percent of homes sold in Salinas during the first quarter were affordable to families earning the area's median income of $53,800.
San Francisco, Calif., which has most often appeared at the bottom of the
affordability chart since the HOI was instituted in 1991, improved somewhat
in the latest index. A 7.5 percent increase in the area's median household
income was responsible for lifting San Francisco two spots to the third-least-affordable market, with 9.2 percent of homes sold in the first quarter within the grasp of families earning the area's median income of $86,100.
As usual, the Midwest was the most consistently affordable region for housing, with 18 entries on the "25 Most Affordable Metro Areas" list, while the South had five markets on that list, the Northeast had two and the West had none. Conversely, the West had 20 entries on the "25 Least Affordable Metro Areas" list, while the Northeast had five and the Midwest and South were not represented there.
The most affordable metro areas by region in the first quarter of 2002 were:
Vineland-Millville-Bridgeton, N.J. in the Northeast; Elkhart-Goshen, Ind. in
the Midwest; Wilmington-Newark, Del.-Md. in the South; and Boise City, Idaho in the West. The least affordable metro areas by region were: Portsmouth-Rochester, N.H.-Maine in the Northeast; Ann Arbor, Mich. in the
Midwest; Miami, Fla. in the South; and Salinas in the West.
Results of the first quarter 2002 HOI can be downloaded online at:
www.nahb.com/Q1_2002_Tables.xls . This is an Excel spreadsheet file. Click
on the tabs at the bottom of the page to change from one table to the next.
SPECIAL EDITOR'S NOTE: The Housing Opportunity Index is based on the median family income, interest rates, and the price distributions of homes sold in each market in a particular quarter of a year. The price of homes sold is collected from actual court records by First American Real Estate Solutions, a marketing company. The median family income for each market is calculated by the Department of Housing and Urban Development.