Homes in the Valley and across the nation grew more affordable in the first quarter thanks to low mortgage rates. The National Association of Realtors released its quarterly Affordability Index on Thursday, which rose nearly 4 percentage points to a 30-year high at 144.
The index measures housing affordability based on median-home prices, income and financing. An index of 100 means the typical household earning the median-family income could afford to purchase a median-priced home. From January to March, the median-family income was $52,929 and the median home price was $161,500. An index of 144 means a person earning the median-family income could afford to buy a $232,600 home.
Association president Cathy Whatley said existing-home sales set a record in the first quarter, which coincides with the index. The homeownership rate reached 68.3 percent in the United States because mortgage rates offset rising prices. Association chief economist David Lereah said affordability conditions may dip by fourth quarter.
"Although the rate of increase in home prices is expected to slow, a gradual rise in mortgage interest rates, is likely to work against higher incomes and the index could ease several percentage points by the fourth quarter," he said.
The association didn't have first quarter Valley numbers available, but said the Valley typically does better than the nation. In the fourth quarter, the Valley affordability index was 173.7. The median-family income was $59,025 and the median-home price was $145,800. "It continues to be above the national numbers because the median price is lower and the median income is higher, association spokesman Walter Molony said.
The Arizona Real Estate Center at Arizona State University studies Valley affordability and showed a different index, but the Valley is still doing well. The first quarter index was 131. The real estate center uses a different set of assumptions than the association. The median home price was $163,545 and the median-household income was $48,600. The first quarter index was three percentage points higher than fourth quarter.
"Interest rates are keeping homes affordable because home prices are going up and income isn't going up much," said Butler, director of the real estate center. He said given the Valley's economy and lack of job growth, the association study seems high.
"One of the problems you always get with affordability is you look at the median price, which is the price of the homes sold," Butler said. "The issue gets to be, all those homes sitting out there that aren't being sold, are they unaffordable?"