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by Jann Swanson
2012 On Pace to be Record Year for Housing Affordability

Even though home prices have been rising, the National Association of Realtors® (NAR) said today that 2012 appears primed to set a record for housing affordability. With 11 months of data in, NAR's Housing Affordability Index was at 198.2 in November, down 2.5 index points from October but 1.5 points higher than in November 2011. When December data is compiled, NAR projects that the housing affordability index for 2012 will be a record high 194, up from 186 from 2011, the previous record year.

The index is based on the relationship between median home price, median family income, and average mortgage interest rate. An index of 100 is the point where a household with a median income for the local area has exactly enough income to qualify for the purchase of a median-priced single family home in that area. The assumptions are the buyer has a 20 percent downpayment and that the resulting mortgage payment would not exceed 25 percent of gross income. The higher the index, the greater the household purchasing power and buyers with small downpayments, typical of first-time buyers, would have relatively lower affordability levels.

In computing the index NRA used a national median home price of $180,600 and median income of $61,758. The principal and interest payment would be $649 which represents 12.6 of household income...

...The Midwest had the highest index at 250.7, up 0.5 from October, based on a home price of $143,100 and income of $61,732... more at Mortgage News Daily

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