Purchasing power for first-time and repeat homebuyers has climbed to the highest level in 20 years, according to the National Association of Realtors.
This comes as good news to mortgage lenders, who will have to rely more and more on purchase mortgages once the refinancing boom begins to wane.
Low Interest Rates a Spur
The association's index of housing affordability was 134.5 for the third quarter of 1993, up from 126.6 a year ago.
The index means a typical family has 134.5% of the income needed to purchase a $108,400 home -- the median price -- with conventional financing and a 20% down payment, according to the association.
Ken Patton, an economist at the National Association of Realtors, said that the increased affordability resulted from low interest rates. He said that as long as interest rates remained stable or fell, housing affordability would probably do the same.
Mortgage interest rates. which have inched upwards in the past two weeks, are at their lowest levels in more than 20 years.
|More Realistic' Prices
The third-quarter rise marks the fifth consecutive quarter in which the index has climbed.
"Both first-time and repeat buyers are finding that it's easier to purchase a home, with low interest rates and prices more realistic than they were two and three years ago," said William S. Chee, president of the National Association of Realtors.
But rising down-payment requirements are restricting gains for younger families and renters, he said.
This affordability gap between first-time buyers and those who want to step up has shown little change in the past several quarters.
First-time buyers cannot afford the homes their predecessors could, according to statistics. An income of $27,250 was needed in the third quarter to buy a $92, 1 00 starter home with conventional financing. The median income for first-time buyers was $23,979, only enough to buy a $8 1,000 home.
"But those who can get beyond the down-payment hurdle to purchase a home of their own are realizing that in the majority of instances, a monthly mortgage payment is much less than the monthly rent check they are writing," Mr. Chee said.