The year 2012 was one of the most affordable years ever to buy a home as prices hit bottom and mortgage rates set record lows.
The National Association of Realtors announced Wednesday that its Housing Affordability Index stood at 198.2 at the end of November, and it forecast a full-year record high of 194 when December’s index is calculated.
The association calculates the index based on the median home price, family income, and average mortgage interest rate. A reading of 100 is the point at which a family with a median income can afford a median-priced home, and a higher index number indicates more purchasing power available to consumers.
Looking ahead, 2013 is expected to be the third best year on record in terms of household buying power — provided buyers are able to qualify for a mortgage.
The NAR projects the national Housing Affordability Index to average 160 during the year ahead, which means that a median-income family would have 160 percent of the income needed to purchase a median-priced single-family home. Even in Western states, where the regional affordability index is lower, a typical family is “well positioned in most markets,” the NAR said.
The past year, while notable for its low home prices and mortgage rates, had its problems, too: low inventory, steep competition for homes, and tight mortgage lending standards, which kept many families from buying homes.
Fortunately, a gradual rise in home prices that started in the second half of 2012 is expected to coax more sellers into the market in 2013, which should help relieve the pent-up demand for homes.
(Dollar bills photo courtesy of Images of Money, via Flickr.)