SILVAR  :  Newsroom  : Real Estate Articles

Real Estate Articles

REALTOR®: Housing affordability index sets record for 2012

Wednesday, January 9, 2013

2012 will likely be regarded as one of the best years for families who could get a mortgage to realize the American dream of homeownership. With record low mortgage interest rates and lower home prices, the National Association of REALTORS® says last year will probably go down as a record year for favorable housing affordability conditions.

NAR's national Housing Affordability Index, which is based on median home price, median family income and average mortgage interest rate stood at 198.2 in November, the highest recorded since recordkeeping began in 1970. NAR projects a housing affordability index of 194 for 2012, up from 186 in 2011.

The higher the index, the greater the household purchasing power. An index of 100 is the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. Affordability levels are relatively lower for buyers making small down payments.

NAR projects the housing affordability index to average 160 during 2013. "Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power," says NAR chief economist Lawrence Yun.

In California, rising home prices offset lower interest rates, reducing housing affordability. The California Association of REALTORS® reported in November that the percentage of home buyers who could afford to buy a median-priced, existing single-family home fell to 49 percent in the third quarter of 2012, down from 51 percent in third-quarter 2011.

While affordability levels are still better than in previous years, Carolyn Miller, president of the Silicon Valley Association of REALTORS®, says many places are experiencing a record low inventory, resulting in multiple offers and steep competition among buyers. "This situation, including the strict lending requirements still in place, has succeeded in shutting out first-time home buyers from what appears to be an ideal market for them. Instead, it's the investors, many of whom are cash buyers, who are buying the little property there is," said Miller.

Miller added that the rising prices in the region are a good sign for sellers. "We hope as sellers see that home values are recovering, they may be convinced that this year would be a good time to put their home on the market," said Miller.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

» Back to Real Estate Articles

Site Navigation