
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, February 10, 1994                   TAG: 9402100050
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

MORE FAMILIES ABLE TO BUY THEIR OWN HOMES

The ability of the typical American family to own a home rose in the final three months of 1993 to the highest level in more than 20 years, a real estate trade group said Wednesday.

The National Association of Realtors said its Housing Affordability Index hit 140.5 points in the fourth quarter, highest since 145.1 in the second quarter of 1973.

In contrast, the index stood at 134.7 during the July-September period and 130.1 in October-December 1992.

The realty group attributed the recent increases to low mortgage rates and an improving economy.

"We expected these exceptional numbers after seeing interest rates drop for the last year and a half," said Robert Elrod, association president.

"People are no longer feeling reticent about the economy, and current market conditions are literally opening the door to home ownership for thousands of families - both first-time and repeat buyers."

A separate index measuring the ability of first-time buyers also set a record in the fourth quarter, although it continued to lag behind the overall index.

The first-time index, which shows the ability of renters to qualify for mortgages on starter homes, was 91.9 points, up from 88.1 in the third quarter and the highest since it was established in 1981.

When the composite index reaches 100, it means a family earning the median income has exactly the amount needed to buy a median-priced previously owned home, using conventional financing and a 20 percent down payment.

Because the median is the midpoint of any measure, the composite index shows that half of the families in the nation had at least 140.5 percent of the income needed to qualify for the purchase of a home with the median price of $106,900. In fact, they could afford a home costing $150,200, using the Realtors' measurements.

When the first-time buyer index equals 100, the typical first-time buyer can afford the typical starter home under existing financial conditions with a 10 percent down payment.

But in the fourth quarter, the median income of the first-time buyer was just $24,098, $2,133 less than the $26,231 qualifying income needed for conventional financing covering 90 percent of a $90,900 starter home. In fact, the first-time buyer could afford a home costing only $83,500.

The first-time buyer median income represents the typical income of a renter family with wage earners between the ages of 25 and 44.

by CNB