Home Affordability Study : It Really *Is* A Great Time To Buy A Home

Are you hearing that it's "a great time to buy a home" from your REALTOR®? Based on the evidence, the old maxim may be right..

Lifetime-low mortgage rates and still-cheap home prices have rendered U.S. homes more affordable than at any time in recent recorded history. Home affordability is high nationwide.

If you plan to buy a home in 2013, the best time to buy a home may be today.

Low Rates Put Homeownership Within Reach

Each quarter, the National Association of Homebuilders (NAHB) measures the median household income of 225 metropolitan areas nationwide, and maps those findings against each respective areas' median housing costs.

The result is what's called the Home Opportunity Index (HOI), a quarterly report of home affordability nationwide.

The Home Opportunity Index makes a few assumptions. First, it assumes a 10% downpayment by the buyer. Second, it assumes that mortgage rates are equal to a weighted average of the quarterly fixed- and adjustable-rate mortgages. And, lastly, it assumes that a home buyer's monthly housing payment won't exceed twenty-eight percent of the area monthly median income.

Using these values, the NAHB Home Opportunity Index found that nearly 3 in 4 U.S. residents could "afford" to buy a home.

The Q1 2013 reading of 73.7 marks the 17th straight quarter during which home affordability topped 70%, dating to early-2009. Affordability has been boosted by low mortgage rates and low home prices, as well as an increase in the jumbo loan limits for FHA, VA and conventional mortgages.

 A Home Buyer's Last Chance For Cheap Housing?

In 2007, the economy took a beat-down. Home prices sunk and mortgage rates lowered from 7.00 percent and into the 3s.

Today, though, the economy mends. More than 5.3 million jobs have been added back; home prices are rising in many U.S. markets; and consumer spending is on the rise. Home affordability is among the lingering effects of last decade's recession. Soon, however, homes won't be so affordable.

If you plan to buy a home in 2013 or 2014, consider moving up your timeframe. Beyond the cliché, it really is a good time to buy. Get started by seeing how much home you can afford. Get a rate quote online and start to build your budget.

by Dan Green