National Housing Affordability Index At One of The Highest Levels In History - Is it in Marin County As Well?

Interest rates are historically low, especially given that we are coming out of a recession. That creates an historic buying opportunity, as we have low prices combined with cheap financing. The combination of the two is almost unheard of, because typically cheap money drives prices higher.

Here’s more evidence that this is a great time to buy because of this the phenomenon. The Housing Affordability Index, tracked by the National Association of Realtors, is at it’s highest level since it’s inception in 1989!

The index measures whether or not a typical family could qualify for a mortgage loan on a typical home. A typical home is defined as the national median-priced, existing single family home. The typical family is defined as one earning the median family income as reported by the US Bureau of the Census. The prevailing mortgage rate is the effective rate on loans closed on existing homes form the Federal Housing Finance Board. All of these components are combined with underwriting standards to determine if the average family can qualify for a mortgage.

For the quarter just ended, the index is at 177. That means that a family earning the median income has 170% of the income necessary to qualify for a conventional loan covering 80% of the price of a median priced single family home!

In other words, relative to income, housing is the cheapest it has been in a very, very long time. Back in the crazed market of 2005, the index was barely above 100, so the average family could barely afford to buy a home.
Obviously, Marin is different, in that home prices and incomes here skew much higher than the national average. But if someone were to track and compute all of the data, it is likely that the same would be true for the Marin market as well. Average sale price has declined significantly, and while income has fallen as well, it hasn’t declined as rapidly. The Marin affordability index is probably at its highest rate in years as well!

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