Housing affordability drops to 14-year low in the second quarter

REAL ESTATE WATCH

August 07, 2005|By Bloomberg News

Housing affordability dropped to a 14-year low in the second quarter, when prices rose at the fastest pace in more than a quarter century.

The average household had 120.8 percent of the income needed to purchase a property at the median home price of $208,500, according to the National Association of Realtors. That share was the lowest since the third quarter of 1991, when it was 113.7 percent.

The average percentage of a household's income used to pay a monthly mortgage bill rose to 20.7 percent, the highest since 1991.

A reading of 100 means a household with the national median income - $56,917 in the second quarter - makes exactly enough to pay for a median-priced home, assuming the buyer makes a 20 percent down payment. In the previous three months, the index measured 133.2 percent.

Prices for existing homes gained 14 percent in the second quarter from a year earlier, more than at any other time since 1979, the association said.

Bloomberg News

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