The affordability index associated with Alabama housing during the third quarter increased by 8.5 percent compared to the third quarter of 2011. Another record level for this period of the year (see graph).
According to ACRE’s quarterly report, the Alabama Statewide Housing Affordability Index for the third quarter of 2012 was computed at 240.5 eclipsing the prior record for the third quarter (2011) of 221.6.
Sixteen of seventeen, or 94 percent, of the local markets areas tracked in Alabama showed an increase from the same period in 2011. Monroe County was the lone exception.
The standard definition used by the Alabama Center for Real Estate in describing the statewide housing affordability index is as follows:
“The statewide housing affordability index is calculated as the ratio of the state’s actual median family income to the income needed to purchase and finance the state’s median priced home. An index number of 100 means that a family earning the state’s median income has just enough buying power to qualify for a loan on the state’s median priced, single-family home, assuming standard underwriting criteria.”
The higher the index number is, the more affordable the housing.
The median home price for the quarter used for the calculation is computed from the median prices of homes sold in the reported areas during the third quarter in Alabama.
The Alabama Housing Affordability Index of 240.5 calculated for the third quarter of 2012 means that an Alabama family which earned the statewide median income of $55,400 had over twice (or 2.40 times) the income needed to qualify for a loan to purchase the statewide median priced home.
The median price of homes sold and the composite monthly interest rate are the two primary factors that fluctuate and affect the affordability of homes in Alabama, as well as the nation.
The combination of a downward trend in interest rates and lower selling prices of homes in Alabama have resulted in the highest affordability levels on record and a tremendous opportunity for those ready and able to make a home purchase