The chart above shows the National Association of Realtors' Housing Affordability Index
) from January 2007 to Feburary
2008 (last month estimated, actual data will be available on Thursday), based on the national median-priced home, median family income, and the 30-year fixed mortgage rate.
has gone from 103.6 in July 2007 to 130.3 in January 2008, and will maybe go even higher in February, given the 3% drop in median home price from $205,000 in January to $198,700 in February. A composite HAI
of 130.3 means that a family earning the median family income had 130.3% of the income necessary to qualify for a conventional loan covering 80% of a median-priced existing single-family home in January 2007.
This increase of almost 27 points in the HAI
in just six months, from both falling home prices and falling mortgage rates, is already starting to have a positive effect on the housing market (February sales increased) and could continue to play an important role in the recovery process for the slumping real estate market.