One of the unintended (if not unexpected) outcomes of the housing bust and economic recession has been a dramatic rise in housing affordability according to the National Association of Home Builders:
“Released on May 20, the first-quarter index found housing affordability hovering for the fifth consecutive quarter near its highest level since the series was first compiled 19 years ago.
“The HOI [Housing Opportunity Index] showed that 72.2% of all new and existing homes sold in the first quarter of 2010 were affordable to families earning the national median income of $63,800, slightly higher than the previous quarter and near the record-high 72.5% set during the first quarter a year ago.
“The latest report is very encouraging because it indicates that homeownership continues its more than year-long trend of remaining within the reach of more households than it has for almost two decades,” said NAHB Chairman Bob Jones. “With interest rates remaining at low levels, companies starting to hire new employees and the economy beginning to rebound, this should encourage more home buyers to enter the market and help further stabilize housing and the economy.”
The causes of housing affordability vary by region. For example, the Indianapolis housing market has become so affordable the “median family” could afford 95 percent of the homes sold during the first quarter of 2010. A a relatively resilient employment market (9.5% unemployment in March 2010 according to the U.S. Bureau of Labor Statistics) despite the recession meant family incomes were relatively stable as home prices fell, boosting affordability. In contrast, Youngstown continued to struggle economically with 14 percent unemployment during March 2010, but achieved the same level of affordability.
Nevertheless, the overall trend is encouraging and a good sign that the housing market may have bottomed out.