NAR’s Chief Economist, Lawrence Yun, says that today’s homes are more affordable than at any time in the past 40 years. But as the economy improves, expect housing prices to rise again, making homeownership less affordable. VAR and Housing Virginia recognize the need to keep housing within reach for those want to pursue (and understand the responsibility of) the American dream of homeownership.
To help housing advocates and state officials understand trends in housing affordability, VAR, local Multiple Listing Services (MLSs) in Virginia, and Housing Virginia are partnering to create a quarterly Housing Affordability Index. The initiative was announced at the Governor’s Housing Conference.
Details after the jump. Housing Virginia, a statewide non-profit entity dedicated to affordable housing and the Virginia Association of Realtors (VAR), announced today a joint effort to produce of a quarterly Housing Affordability Index (HAI) for Virginia beginning in 2010. The announcement of the HAI took place at a press conference held during this week’s Governor’s Housing Conference in Norfolk.
The HAI is a broad measure of housing affordability that examines the relationship between both buyers’ and renters’ housing costs and their household income. This is the first housing index in the nation to consider both buyer and renter affordability on a statewide basis. The overall HAI reflects the relative supply and affordability of owner and renter housing. “Basically what we’re looking at is presenting the percentage of a typical Virginia household’s income necessary to afford the typical home in Virginia,” explained Scott Brunner, CEO of the Virginia Association of Realtors.
The Virginia Center for Housing Research at Virginia Tech is conducting the analysis, which will relate the affordability of housing across the Commonwealth based on median sales price of homes sold and median rent paid to the median household income of families. The HAI will be available for individual market areas (counties and cities) as well as regions across the Commonwealth.
The median-priced, existing single-family home is produced from local Multiple Listing Service data calculated by area in the Virginia Association of Realtors’ quarterly Virginia Home Sales Report. The typical family income is defined as the median household income in an area as reported by the U.S. Bureau of the Census.
“In general, areas where the median housing costs require less than 30% of the median household income are considered more affordable, and areas where housing costs exceed 30% of household income are considered less affordable to the typical family,” said Kit Hale of Roanoke, chairman of Housing Virginia.
For example, taking 30 percent of income as the baseline for affordability, a median-income family earning $60,000 and paying 30% of their income for housing could expect to pay $18,000 in housing costs annually; That amounts to $1,500 per month for rent or mortgage principal, interest and taxes. Likewise, a median-income household earning $45,000 could expect to pay $13,500 in housing costs annually or $1,125 per month.
“As Virginia Realtors, we work to find the best housing option for each consumer we serve. For some that may be renting; for others, it may mean helping another family achieve the American dream of homeownership,. Regardless of which alternative a consumer wants or needs, we believe the new statewide affordability index will give consumers a useful tool and a truer picture of housing costs in today’s Virginia markets,” said VAR President Cindy Stackhouse of Dumfries.
“The board of directors of Housing Virginia has long believed that housing affordability is an issue that affects everyone. Housing affordability has a tremendous impact on our economy and the quality of life in our communities, right down to questions of whether our firefighters and school teachers can afford to live in the communities where they work,” added Hale.
The first Housing Affordability Index is expected to be released in January 2010, and should reflect housing data from the final quarter of 2009.