Affordability Index Up Slightly in 4th Quarter

The National Association of Realtors said its index of housing affordability rose 3.6 points in the fourth quarter of 1994, to 131.6. But the index is still about 10 points below its level of a year ago.

Edmund Woods Jr., president of the association, said the rise resulted mostly from a seasonal drop in house prices and came despite an increase in mortgage rates. But with rates still on the rise, "there is no guarantee the quarter-to-quarter upward trek would continue into this year," Mr. Woods added.

The index has taken on new importance because of President Clinton's pledge to increase homeownership to a record level by the end of this century. Rising mortgage rates have been cutting into the affordability of homes for the last year, with the gain in the fourth-quarter apparently a short-lived aberration.

Homeownership peaked at about 66% in 1980, then drifted down for 10 years. It has edged up recently, standing now at about 64%.

The government expects the rate to reach 65% based on existing trends. To top 66%, it would have to create three to five million new homeowners, according to economists.

The affordability index, which measures the ability of a typical American family to buy a home, means that half the families in the nation had at least 131.6% of the income needed to qualify for the purchase of a home with a median price of $107,900. The typical family could actually afford a home costing $142,000.

The median home price in the fourth quarter was down from a median price of $110,800 in the third quarter, but up from the median price of $107,000 in the fourth quarter of 1993.