Higher prices, rates cut affordability of houses across U.S.

REAL ESTATE WATCH

November 09, 2003|By Bloomberg News

U.S. housing affordability fell in the third quarter because of gains in home prices and mortgage rates, according to the National Association of Realtors.

The Housing Affordability Index fell to 136.6, the lowest in a year, from 143.8 in the previous quarter, the Washington-based group said last week. A reading of 100 means a family with the national median income earns exactly enough to pay for a median-priced home. A higher reading indicates homes are more affordable.

Affordability eroded as the median U.S. home price rose at the fastest pace since 1980 and mortgage rates climbed from the 45-year low reached in June, said Lawrence Yun, an NAR economist. "The price gains are beginning to affect affordability and, even though mortgage rates are still low from a historical standpoint, they are up from the record low," Yun said.

Last quarter, home prices increased 10 percent to $177,000 from $160,800 a year earlier, the fastest pace since the 13 percent gain seen in the fourth quarter of 1980.

The average U.S. rate for a 30-year fixed mortgage fell to a 45-year low of 5.21 percent in June and rose to 5.94 percent last week, according to Freddie Mac, the second-largest U.S. mortgage buyer.

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