Housing affordability reached an all-time high in January, according to a report from the National Association of Realtors.
The industry's groups Housing Affordability Index, which measures the relationship between median home prices, median household income and mortgage rates, hit a record high level of 206.1 during the first month of 2012. A level of 100 indicates an equilibrium between all three of these variables.
"This is the first time the housing affordability index has broken the 200 mark, meaning the typical family has roughly double the income needed to purchase a median-priced home," said NAR president Moe Veissi. "For buyers who can qualify for a mortgage, now is a very good time to become a homeowner."
The Federal Reserve recently announced that it plans to keep mortgage rates low until at least 2014. With this in mind, Veissi noted that housing affordability should remain high during this time. However, other factors, such as strict lending standards and lack of available credit, continue to hinder prospective buyers from becoming homeowners.
"If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth," Veissi said.
Meanwhile, a recent report from CoreLogic found that home prices fell for the sixth consecutive month in January, which could have been a key factor behind the increase in housing affordability.
The company's report indicated that home prices, including distressed properties, dipped 3.1 percent on an annual basis, while falling 1 percent from the previous month. However, excluding distressed properties, prices fell just 0.9 percent from a year earlier.
"Although home price declines are slowly improving and not far from the bottom, home prices are down to nearly the same levels as 10 years ago," said CoreLogic chief economist Mark Fleming.
State-by-state, South Dakota reported the highest appreciation after rising 5.7 percent. In addition, prices in North Dakota spiked 4 percent, while prices in West Virginia, Montana and Michigan increased 4, 3.6 and 3 percent, respectively.
In contrast, the states with the most significant decline in home prices were Illinois, Nevada, Delaware, Alabama and Georgia.
Since the housing market's peak in April 2006, the report noted that average national home prices are now 34 percent lower, including distressed properties, and 24.2 percent lower without them.
However, even though conditions and home prices became more affordable at the beginning of 2012, the Mortgage Bankers Association's Weekly Application Survey indicated application activity decreased during the week ending March 2, as fewer prospective buyers capitalized on low mortgage rates to make the transition to homeownership.
The report found that mortgage applications dipped 1.2 percent during the week, while the refinancing share of activity saw a notable decline to 77 percent. The previous week the share was reported at 77.9 percent. Real estate investors were believed to make up a significant portion of the demand, as they prepare to take advantage of new government-sponsored programs that work to sell distressed properties in bulk at bargain prices.
As a result of fewer prospective and current borrowers entering the mortgage application process, the rate for a 30-year fixed-rate mortgage with a conforming loan balance of $417,500 or less fell to 4.06 percent. Meanwhile, the average rate for a 30-year FRM jumbo loan dipped to 4.33 percent from 4.34 percent the previous week.
