Housing Affordability Index From Long & Foster
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Housing Affordability Index From Long & Foster

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An informative overview of the Housing Affordability Index. Includes information about the two major Housing Affordabilty Indices and how they indicate that right now could be a historic......

An informative overview of the Housing Affordability Index. Includes information about the two major Housing Affordabilty Indices and how they indicate that right now could be a historic opportunity to buy a home.

Great information for those considering buying or selling; or for REALTORS(r) to share with clients and prospective clients.

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  • 1. The Housing Affordability Index A Historic Buying Opportunity? Your Name, Photo, Contact Information Goes Here ®
  • 2. Understanding Today’s Housing Affordability Affordability is at it’s Highest Level in Years  Several Mortgage and Housing Industry organizations measure housing affordability.  Two of the most popular measurements come from the National Association of REALTORS® (NAR) and the National Association of Home Builders® (NAHB).  The NAHB® has developed a Housing Opportunity Index (HOI)  The NAR® publishes the Housing Affordability Index (HAI)  Both indicate we are at or near record levels in terms of overall housing affordability. ®
  • 3. The NAR® Housing Affordability Index A Simple Explanation  Essentially, the index is a measure of the financial ability of U.S. families to buy a house.  In simple terms, an index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.  An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.  More information can be found at: www.Realtor.org/research ®
  • 4. The NAR® Housing Affordability Index At Near Record Levels  The index shows a very favorable relationship (well over 100) between home prices, mortgage rates and family income.  Recent and current index numbers are the most attractive since tracking began in 1970s. ®
  • 5. The NAHB® Housing Opportunity Index A Simple Explanation  The HOI is also a measure of the financial ability of U.S. families to purchase a house.  It is the share of homes sold that were affordable to a family earning the median income, based on standard mortgage criteria.  Two major components -- Income and Housing Cost  Income: Uses median family income estimates from the Dept. of Housing & Urban Development and assumes a family can afford to spend 28% of gross income on housing.  Cost: Uses actual sales transactions and calculates payments based on a 30 year fixed mortgage, with 10% down at interest rates from the Federal Housing Finance Board. It includes estimated property taxes and insurance, but not mortgage insurance. ®
  • 6. The NAHB® Housing Opportunity Index Says 65% of Families Can Afford a Home  The highest index since 1992 was reported in the 1st quarter of 2012 at 77.5 - It remains high in Q3 at 64.5 percent.  More information can be found at: www.nahb.org ®
  • 7. Mortgage Rates Remain Low Creating Opportunities for Buyers & Sellers  Similar to the affordability index trends, mortgage rates are also at historic low levels since the early 1970s. ®
  • 8. Even A Modest Increase in Rates Adds Up Over Time…  The chart shows the impact of each 0.25% change for $100,000 financed over the life of a 30 year mortgage Increase in Total Monthly Payments Over 30 Years Per $100k Financed - - Shown for Each 0.25% Increase in Rate $60,000 $51,089 $50,000 $45,138 $39,251 $22,582 $40,000 $33,431 $27,680 $30,000 $21,997 $16,387 $20,000 $10,849 $10,000 $0 $57,102 $5,386 $0 4.50% 4.75% 5.00% 5.25% 5.50% 5.75% 6.00% 6.25% 6.50% 6.75% 7.00%  Going from 5.0% to 6.0% – adds cost of $22,582 over 30 years. ®
  • 9. Summary  Both the HAI and HOI show Housing affordability at or near record levels.  The Freddie Mac® Mortgage Survey shows mortgage rates at the lowest on record since the early 1970s – This contributes to housing affordability by lowering monthly payments for buyers.  Even a modest increase in mortgage rates could cost buyers thousands of dollars over the life of a 30 year fixed mortgage.  The Bottom Line: This could be a historic opportunity to buy a new home. ®
  • 10. Thank You Your Name, Photo, Contact Information Goes Here ®