Strong year-over-year price gains are starting to take a bite into housing affordability, according to the National Association of REALTORS®’ latest quarterly report.
“The vast majority of home owners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending,” says Lawrence Yun, NAR’s chief economist. “At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. This is beginning to hamper housing affordability.”
The national median existing single-family home price in the fourth quarter was $196,900, up 10.1 percent from $178,900 one year earlier.
NAR’s Housing Affordability Index, calculated on the relationship between median home prices, median family incomes, and the average effective mortgage interest rate, dropped to 175.8 in 2013 from a record high of 196.5 in 2012. The higher the index, the stronger household purchasing power is, according to NAR.
Source: REALTOR® Magazine Daily News