The document discusses two housing affordability indexes - the National Association of Realtors' Housing Affordability Index (HAI) and the National Association of Home Builders' Housing Opportunity Index (HOI). Both indexes show that housing affordability is currently at or near record high levels, indicating families can more easily qualify for mortgages to buy homes. Additionally, mortgage rates remain extremely low by historical standards, enhancing affordability further. However, even small increases in rates over the life of a 30-year mortgage could end up costing homeowners thousands of extra dollars. Overall, the document argues the current environment presents a historically favorable opportunity for families to purchase homes.

1. The Housing Affordability Index
A Historic Buying Opportunity?
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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.
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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
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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.
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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.
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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
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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.
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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.
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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.
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