NC State Ag Economist Dr. Mike Walden – “Housing Affordability”

Mary:  I’m Mary Walden, with economist MW, welcoming you to the economic perspective. Today’s program looks at housing affordability.  Mike, buying a home is the largest financial transaction most households will make.  How do we measure the ability of households to purchase a home?

Mike:  Summary Answer

  1. For several decades the National Assoc. of Realtors has used a housing affordability index
  2. Calculated by taking the median priced home and current mortgage interest rate and then calculating whether a household with average income can qualify for a home loan
  3. Ironically, since the Great Recession affordability has been very high, due to slow rise in home prices and big drops in mortgage interest rates
  4. More recently, affordability index – although high – has dropped somewhat due to faster rising home prices and some upward movement in mortgage rates
  5. Some say one flaw in the measure is ignoring the investment value of a home
  6. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service