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Housing Affordability
by Anita Remesch, BS
 In the first quarter of 2008, housing affordability increased due to a decline in mortgage interest rates and an increase in median incomes. The largest increase was felt in the Pensacola MSA (Metropolitan Statistical Area) with a 10.5 percent increase in housing affordability. The Panama City and Fort Walton Beach MSA’s affordability increased 7.9 percent and 4.4 percent respectively. On the national level, housing affordability increased 13.4 percent. Since the first quarter of 2007 housing affordability has increased 14.6 percent in Pensacola MSA, 13.2 percent in Fort Walton Beach MSA and 10.9 percent in Panama City MSA.
The median home prices remained steady in Northwest Florida since the fourth quarter of 2007. Panama City MSA had a slight increase of .7 percent from $191,900 to $193,300. Fort Walton Beach MSA increased .5 percent from $197,900 to $198,800. Pensacola MSA’s median home price remained the same at $156,400. Nationally, the median home price decreased 4.8 percent from $206,200 to $196,300. The statewide median home price decreased 6.3 percent from $216,000 to $202,300. Interest rates nationally decreased 5.2 percent from 6.17 percent to 5.85 percent. Interest rates regionally decreased 5.7 percent from 6.17 percent to 5.82 percent.
The housing affordability index measures whether housing is becoming more or less affordable within a region. To calculate the index, median household income is compared to the required income for a mortgage on a median-priced, existing single-family home. Required income is a function of the average regional loan rate and equal to four times the annual mortgage payment. A higher index value indicates an increase in affordable housing. Housing can become more or less affordable due to a rise in median household income or a drop in the income level needed to qualify. An increase in affordability can occur when home prices drop or interest rates fall.
Another index to consider in determining housing affordability is the National Association of Homebuilders (NAHB)–Wells Fargo Housing Opportunity Index (HOI). The HOI for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the local median income. According to the NAHB, 53.8 percent of the new and existing homes sold during the first quarter of 2008 were affordable to families earning the national median income. In Northwest Florida, the Pensacola MSA has a HOI of 74, the Fort Walton Beach MSA has a HOI of 49.4 and the Panama City MSA has a HOI of 33.6.
While Northwest Florida’s housing affordability is increasing there are many factors that are still unfolding. A national recession, mounting foreclosures, tight credit markets and wary buyers are all affecting the housing market. With ballooning fuel prices altering how people drive, fuel prices may soon affect where people live.
Housing Affordability Index
| Loan Amount Required: |
80% |
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| National Loan Rate:1 |
5.85 |
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| Average Regional Loan Rate:1 |
5.82 |
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| Number of Monthly Periods: |
360 |
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| Payment Period in Years: |
30 |
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Median2 |
Median3 |
Loan |
Monthly4 |
Annual |
Required5 |
Housing Affordability Indices |
| Area |
Income |
Price |
Amount |
Payment |
Payment |
Income |
Q1 08 |
Q4 07 |
Q3 07 |
| Panama City MSA |
$53,800 |
$193,300 |
$154,640 |
$909 |
$10,908 |
$43,632 |
123.30 |
114.03 |
105.61 |
| Pensacola MSA |
$55,900 |
$156,400 |
$125,120 |
$736 |
$8,832 |
$35,328 |
158.23 |
143.16 |
129.90 |
| Fort Walton Beach MSA |
$63,200 |
$198,800 |
$159,040 |
$935 |
$11,220 |
$44,880 |
140.82 |
134.87 |
116.55 |
| US |
$61,500 |
$196,300 |
$157,040 |
$926 |
$11,112 |
$44,448 |
138.36 |
122.06 |
111.04 |
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| 1. Interest rates are obtained from Freddie Mac's Primary Market Mortgage Survey (www.freddiemac.com) |
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| 2. Median Family Income data obtained from the US Department of Housing and Urban Development (www.huduser.org) |
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| 3. Median Price data for single-family, existing homes is taken from the Florida Association of Realtors (http://www.floridarealtors.org/) |
| and the National Association of Realtors (realtor.org) for the U.S. & respective MSAs. |
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| 4. The Monthly Payment calculation is based on the 30-yr fixed-rate with level amortization for the U.S. and the respective MSAs. |
| 5. The Required Income calculation is 4 times the Annual Payment amount as required by most mortgage bankers. |
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