Friday, November 16, 2001

More families can afford to buy home

By Jeff McKinney
The Cincinnati Enquirer

        The lowest mortgage interest rates in at least four years helped make homes more affordable locally, a new report shows.

        Housing affordability for metro Cincinnati rose to its best level in a year during the second quarter, according to the National Association of Home Builders' Housing Opportunity Index (HOI), released earlier this month.

        The index measures the percentage of homes sold in a given area during a certain period that families making the median income in that area can afford to buy.

        “It's probably the best time in 20 to 30 years in Cincinnati to buy a house, as we have a touch of a recession, interest rates are low and home prices are very reasonable,” said Norman Miller, a University of Cincinnati professor of real estate.

        The HOI hit 79.6 percent for Cincinnati's metro area in April through July, up slightly from 79.4 percent from January through March this year and up from 75.8 percent in the second quarter of 2000. The higher the number, the more families that can afford homes.

        For Hamilton and Middletown, the index came in at 80.9 percent in the second quarter, down from 82.9 percent in the first quarter.

        Nationally, the HOI hit 63.4 percent, its highest level since 1999's fourth quarter. Kokomo, Ind., had the nation's most affordable HOI at 94.07 percent; San Francisco was worst at 6.7 percent.

        The combination of declining interest rates and stable home prices has made homes more affordable in Cincinnati, said Gopal Ahluwalia, director of research at the National Association of Home Builders.

        Indeed, the median price for a home in Cincinnati was $125,000 in the second quarter, up slightly from $124,000 in the first quarter. Median family income in the area is $60,500.

        “The falling rates and stability in home prices have helped increased affordability in that area,” Mr. Ahluwalia said.

        Mr. Miller said declining mortgage rates make homes more affordable to renters and first-time and second-time buyers.

        Locally, mortgage rates have dipped to the lowest level since at least 1997. That has enabled more consumers to afford homes and prompted more sellers to list homes in a weak economy.

        The average 30-year, fixed-interest rate this week was 6.65 percent, down from 7.96 percent a year, according to the Cincinnati Area Board of Realtors. That meant an $88.67 difference in the monthly payment this year on a $100,000 mortgage.

        The home ownership rate in the city of Cincinnati has remained at 34.8 percent, one of the lowest rates among U.S. cities. Mr. Miller said there is not much land available, causing home builders to turn to the suburbs.


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