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.

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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10. Thank You
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