Steadily rising prices signal happy days for home sellers recovering from the beaten-down values of the recession. But it's a different story for buyers. Coupled with higher mortgage rates, they're finding it more difficult to afford a home.
Home affordability nationwide slipped during the second quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
"Housing affordability has been hovering near historic highs for the past several years, largely due to exceptionally favorable mortgage rates and low prices during the recession," NAHB Chairman Rick Judson said in a release.
Prices rise, affordability falls
According to the index, 69.3 percent of new and existing homes sold during the second quarter were affordable to families earning the U.S. median income of $64,400, compared with 73.7 percent of such homes sold during the first quarter. The second-quarter drop also marks the first time the index has fallen below 70 percent since late 2008.
The second-quarter median price of all new and existing homes sold in the U.S. was $202,000, compared with the second-quarter median price of $185,000 a year ago.
Could it get worse?
David Crowe, NAHB chief economist, noted in a release that while rising mortgage rates and home prices are contributing to the drop in home affordability, there are other, looming factors that are a concern. Congressional discussions about reducing the mortgage interest tax deduction along with President Barack Obama's proposal to promote private investment in mortgages could make them more expensive for borrowers.
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