Affordability index for houses declines to a 2-year low

REAL ESTATE WATCH

August 08, 2004|By Bloomberg News

The affordability of homes in the United States fell to a two-year low during the second quarter as higher mortgage rates and prices made it harder for people to buy real estate.

The Housing Affordability Index declined to 133.6 from 144.1 in the previous quarter, the National Association of Realtors in Washington said last week. It was the lowest since 131.7 in the second quarter of 2002.

A reading of 100 means a household with the national median income makes exactly enough to pay for a median-priced home. A higher reading indicates more affordability.

Mortgage rates jumped almost 1 percentage point in April after a government report showed the economy was adding jobs at a faster-than-expected pace.

By the end of the year, the average fixed rate will be close to 7 percent from 5.99 percent last week, NAR economist Lawrence Yun predicted.

- Bloomberg News

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