Average family can afford more for home
The average family can now afford nearly 63 percent of homes offered in today's market, according to a recent study.
Low interest rates and home prices helped lift housing affordability slightly in the past quarter, according to the National Association of Home Builders and the Wells Fargo Housing Opportunity Index.
Overall, 62.8 percent of new and existing homes were affordable to families earning $63,900, the national median income.
"This upturn in affordability is a positive development and is in line with what we are hearing from builders in the field that more prospective buyers are starting to move forward in the marketplace," says NAHB Chairman Tom Woods.
According to an affordability report from the National Association of Realtors, the median single-family home price rose to $208,700 in the fourth quarter. But an increase in the national family median income, mixed with low interest rates, helped to slightly improve affordability, it was reported by NAR.
"Low interest rates helped preserve affordability last quarter, but it'll take stronger income gains and more housing supply to help meet the pent-up demand for buying," Lawrence Yun, NAR's chief economist, said in a statement.
Q. Is it possible that mortgage rates are dropping still lower?
A. They are indeed. On March 5, Freddie Mac released the results of its Primary Mortgage Market Survey, showing average fixed-mortgage rates moving lower for the first time in four weeks and remaining near late May of 2013 lows.
As this is written, the 30-year fixed-rate mortgage averaged 3.75 percent with an average 0.6 point, down from the previous week when it averaged 3.80 percent. A year ago at this time, the 30-year FRM averaged 4.28 percent.
Q. Are home sales picking up?
A. Home sales are improving, according to most recent reports. Improved buyer demand at the beginning of 2015 pushed pending home sales in January to their highest level since August 2013, according to the National Association of Realtors.
All major regions except for the Midwest saw gains in activity in January.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, climbed 1.7 percent to 104.2 in January from an upwardly revised 102.5 in December and is now 8.4 percent above January 2014. This marks the fifth consecutive month of year-over-year gains, with each month accelerating the previous month's gain.
Q. Is the housing market improving, generally?
A. Yes, reports are very positive. For example, Freddie Mac recently released its newly updated Multi-Indicator Market Index showing the housing market continuing to stabilize at the national level for the fourth consecutive month.
Thirty-eight of the 50 states plus the District of Columbia and 40 of the 50 metropolitan areas are now showing an improving three-month trend. Three additional metros entered their benchmarked stable ranges of housing activity, including Buffalo, Boston and Nashville.
The national MiMi value stands at 74.9, indicating a weak housing market overall, but showing a slight improvement from November to December and a positive three-month trend.
On a year-over-year basis, the housing market has improved. Sixteen of the 50 states plus the District of Columbia have MiMi values in a stable range, with the District of Columbia (97.6), North Dakota (97.2), Montana (91.1), Hawaii (89.9) and Wyoming (89.1) ranking in the top five.
Q. To what extent are rents increasing?
A. They are rising substantially in most areas. In fact, rapid rent appreciation is reaching beyond housing hot spots to smaller, unexpected markets.
New York City and Silicon Valley rents have been on the rise for years, but now rent is also spiking in smaller housing markets as worsening rental affordability extends its reach, according to a Zillow report.
January's fastest growing rental markets included Denver, Kansas City; Nashville, Tenn.; Portland, Ore.; and Charlotte, N.C. U.S. rents were up 3.3 percent year-over-year in January, near the historical norm. But rents are rising much more rapidly in some markets.
Annual rental appreciation peaked after the housing bust in September 2012 at 6.3 percent.
Q. How do real estate professions view the coming spring season?
A. Generally, they are quite optimistic. Realtors, for example, are more optimistic as they head into the spring selling season, with their housing outlook for the next six months looking more upbeat, according to the National Association of Realtors.
• Email Jim Woodard at storyjim@aol.com.
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