Housing was more affordable last year than at any other time in the 15 years U.S. Housing Markets has been keeping records.
"The typical housing acquisition in 1994, financed conventionally with about a 20% down payment, required only about 20% of household income to meet the monthly payments, including insurance and taxes," the Lomas Mortgage U.S.A. publication reported.
The 1993 figure was 21%. The improvement has been steady over the last five years. Nationally, the average share of income needed to meet monthly payments was 31% in 1989, with inflated house prices the biggest factor. Since then, incomes have risen steadily, home prices have softened, and mortgage rates have dropped.
Last year's affordability appears to have extended into this year, with strength in loans to buy homes buoying the mortgage market in the absence of refinancings. But figures from Fannie Mae and Freddie Mac show that prices have started to climb slightly on a national basis, averaging about 2.7% in the second quarter. The pivotal California market, however, still showed declining prices.
For lenders, higher home prices could be positive, since they may put some people back into the refinancing and home equity markets from which they had been barred because of high loan-to-value ratios. This could offset any dent made in the purchase market.
"Because of lower housing prices and the easy availability of no-points mortgage loans, buyers happily discovered last year that not only would their monthly payment load be lighter, but their required initial outlays would be more manageable as well," according to the report.
The average price of a new home sold in 1994 with conventional financing was $170,700, up $7,000 from 1993. The price gap between newly built homes and resale residences has widened to more than $34,000, as new construction has become more costly while prices of existing homes have eased. The difference was less than $10,000 three years ago.
Robert Denton, executive vice president of Lomas Financial Group, said the typical homebuyers carried a monthly payment of $950, just $10 more than the figure for last year but well below the all-time high of $1,200 a month in both 1989 and 1990.
"Closing the typical conventionally financed housing purchase with a 20% down payment took $29,960 last year, about $380 less than was needed by 1993 buyers, and some $1,630 less than the down payment required by the typical homebuyer in 1992," the executive said in the report.
In summarizing other key points, Mr. Denton wrote:
*Iowa displaced Wyoming last year as the state with the most affordable housing. Monthly payments on the typical home required only about 14.6% of household income.
*Wisconsin, which had an attractive figure of 15.6% of income in 1993, experienced a run-up to 19.4% and dropped from fourth most affordable to No. 28.
*Tampa Bay, Fla., and Houston remained the most affordable markets among those for which sufficient price and sales data were available.
*California and Hawaii continued as the states in which housing was least affordable.
