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Housing Affordability
by Anita Remesch, BS

In the fourth quarter of 2008, housing affordability increased due to decreases in mortgage interest rates and median home prices. The largest increase was felt in the Fort Walton Beach MSA (Metropolitan Statistical Area) with a 24.4 percent increase in housing affordability.  The Panama City MSA increased 15.2 percent and the Pensacola MSA increased 12.6 percent.  On the national level, housing affordability increased 24.2 percent. 

The median home prices either remained steady or decreased in Northwest Florida.  Pensacola MSA’s median home prices decreased .5 percent from $152,500 to $151,700.  Panama City MSA’s median home price decreased 2.8 percent from $192,300 to 186,900.  Fort Walton Beach MSA’s median home price decreased 10 percent from $204,700 to $184,100.   Nationally, the median home price decreased 10.1 percent from $200,400 to $180,100.  The statewide median home price decreased 13.1 percent from $185,400 to $161,200.  Interest rates nationally decreased 16.3 percent from 6.09 percent to 5.1 percent.  Interest rates regionally decreased 16.9 percent from 6.11 percent to 5.08 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, 62.4 percent of the new and existing homes sold during the fourth quarter of 2008 were affordable to families earning the national median income.  In Northwest Florida, the Pensacola MSA has a HOI of 76.7, the Fort Walton Beach MSA has a HOI of 68.8 and the Panama City MSA has a HOI of 46.2. 

Housing Affordability Index