Newspaper article THE JOURNAL RECORD

If Housing Affordability Is Up, Why Are Home Sales Down?

Newspaper article THE JOURNAL RECORD

If Housing Affordability Is Up, Why Are Home Sales Down?

Article excerpt

With interest rates down into the single digits and prices stable, housing affordability indexes haven't been better in nearly 18 years. Now, they say, is a great time to buy a house.

But as it is with so many economic arrows, the direction in which the affordability indexes point is not always the direction in which the economy moves. Buyers don't always do what they're "supposed" to do.

This is a lesson that traditional economists have been slow to learn during the past year or so, when they declared that consumer buying would bring the country up out of recession. Consumers didn't listen to them.

"Incredible home buying opportunities are out there _ stable home prices and very affordable interest rates," declared Dorcas Helfant, president of the National Association of Realtors.

But she and her colleagues now recognize, if they didn't before, that there are a minimum of two considerations when deciding on a purchase. They are ability, of course, but willingness, too.

And lots of people aren't willing.

According to the Realtor affordability index, which stood at 124.7 in January, a family earning the median income had 124.7 percent of income needed to qualify for a conventional, 80 percent loan on the median existing home.

In January, that family earned $36,742, while the median-priced existing home was $102,300.

"If it wasn't for the fact that so many people still feel reticent about the economy, these conditions literally would be opening the door to homeownership for thousands of families and individuals," said Helfant.

While increasingly active, buyers haven't yet stormed the doors of Realtor offices, as the statistics suggest they should be doing. These days, ability means not just the cash but also courage and faith in the future.

The affordability index also omits a very important consideration these days: The formula doesn't include the debts of these median income people, and as any mortgage seeker knows, existing debt often kills an application. …

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