Global| Feb 11 2013U.S. Homebuyers Index Reaches New High In 2012
by:Tom Moeller
|in:Economy in Brief
Summary
First-time homebuyers saw three necessary ingredients for a favorable buying environment in 2012; low prices, lower interest rates and lower monthly payments. The National Association of Homebuilders reported that their Composite [...]
First-time homebuyers saw three necessary ingredients for a favorable buying environment in 2012; low prices, lower interest rates and lower monthly payments. The National Association of Homebuilders reported that their Composite Index of First-time Homebuyer Affordability rose to 132.0, the highest reading on record which extends back to 1981. For the year, the index stood at 129.2.
Moderate home pricing has been instrumental in raising affordability for first-time homebuyers. Home prices for all of 2012 were 20.8% below the peak averaged during 2006. Most recently, however, the home-pricing environment has improved. The average price paid by first-time buyers last quarter was $152,000, up 10.1% y/y. For the year as a whole, the average price rose 6.6% to $149,425.
Recent pricing gains have been offset by other factors to improve affordability. Lower financing costs led the way. For last year on average, the effective interest rate paid fell to 3.83% and was down to 3.50% by yearend. For perspective, these rates compare to 15.38% averaged in 1982. Moderate pricing and lower interest rates reduced the monthly payment to $648, the lowest since 1994. Also helping buyers to make purchases, median incomes rose to $40,156 and were nearly back to the 2008 high.
Housing Affordability compares the hypothetical mortgage payment on a median priced house to median household income. An index of 100 means this "median" payment is equal to the amount of income necessary to meet traditional loan quality standards. The first-time homebuyers data can be found in Haver's REALTOR database.
Why Did Young Families Lose So Much Wealth During the Crisis? The Role of Homeownership from the Federal Reserve Bank of St. Louis can be found here.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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