WASHINGTON (Hanley-Wood News Service) - Nationwide housing affordability dipped slightly but remained on very solid ground in the third quarter of 2001 as interest rates on home mortgages continued downward for a fifth consecutive quarter, according to the NAHB's Housing Opportunity Index (HOI), released yesterday. ''In July through September of last year, interest rates on adjustable- and fixed-rate mortgages hit their lowest point since early 1999, easing the way for potential buyers to qualify for a home purchase,'' said Bruce Smith, NAHB president and a home builder from Walnut Creek, Calif.
The HOI is a measure of the percentage of homes sold that a family earning the median income can afford to buy. During the third quarter of 2001, the HOI hit 61.5, down slightly from the second quarter's 63.4 reading but ahead of every other quarter since the initial three months of 2000. The latest ranking was based on more than 750,000 sales of new and existing homes in 186 markets.
''Families earning the median U.S. income of $52,500 could afford to purchase 61.5 percent of all the homes sold nationwide in last year's third quarter,'' Smith explained. Attributing the favorable sales environment primarily to low interest rates, he noted that the national weighted interest rate on adjustable- and fixed-rate mortgages, which NAHB uses to calculate the HOI, fell to 7.06 percent, marking the fifth consecutive decline since an 8.2 percent reading in the second quarter of 2000. This trend helped offset an increase in the national median home sales price from $156,000 in the second quarter to $161,000 in the third quarter.
''Understanding that every one percent decline in mortgage rates means another 400,000 families can qualify to purchase a home, you can see why housing affordability remained so strong in the latest report,'' Smith noted.
The nation's most affordable housing market in last year's third quarter was Rockford, Ill., which has consistently ranked among the most affordable places and last topped the HOI in mid-2000. ''In Rockford, where the median family income was just over $57,000 and the median home price was $99,000, it's not surprising that 89.4 percent of homes sold in the third quarter were affordable to those in the median income range,'' said Smith.
Among cities with populations of more than one million, Indianapolis ranked at the top of the affordability chart. With a median home sale price of $130,000, 83.4 percent of homes sold in that market during the third quarter were affordable to families making the area's median income of $60,700.
As usual, the Midwest was the most consistently affordable region for housing, with 16 entries on the ''25 Most Affordable Metro Areas'' list. The South had five entries on that list, while the Northeast had four and the West had none. Conversely, the West had 18 entries in the ''25 Least Affordable Metro Areas'' column, while the Northeast had seven entries. Neither the Midwest nor South had any markets among the 25 least affordable.
The most affordable metro areas by region in the third quarter of 2001 were: Syracuse, N.Y. in the Northeast; Rockford in the Midwest; Wilmington- Newark, Del.-Md. in the South; and Anchorage, Alaska in the West. The least affordable metro areas by region were: Portsmouth-Rochester, N.H.-Maine in the Northeast; Ann Arbor, Mich. in the Midwest; Charleston-North Charleston, S.C. in the South; and Santa Cruz-Watsonville, Calif. in the West.
Results of the third quarter 2001 HOI, along with historical HOI data, can be downloaded at http://www.nahb.com/news/hoitables.xls on the Internet.
The Housing Opportunity Index is based on the median family income, interest rates, and the price distributions of homes sold in each market in a particular quarter of a year. The price of homes sold is collected from actual court records by First American Real Estate Solutions, a marketing company. The median family income for each market is calculated by the Department of Housing and Urban Development.