“Housing affordability is at a record high (13.6 percentage points in January to 166.8, a new record high)– the buying power of a typical family has risen significantly,” McMillan says. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and help prices to stabilize in many areas by the end of this year.”

So what this means is that a median-income family, earning $59,800, could afford a home costing $283,400. This assumes a 20 percent downpayment, and a 25 percent of gross income for mortgage PI. Compered to last year where the typical family could afford a home costing $263,300.

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Any renter with a stable job and the desire to become a homeowner and live in Phoenix for a long time should be buying a home right now because affordability has never been better (our analysis goes back to 1981). In 2006, owning a typical detached resale home was $600 per month more expensive (after taxes) than renting a Class A apartment.

-134 metro areas are at their historical best affordability level since 1981

Today, owning is $118 per month cheaper. Rents and home prices are both likely to fall in 2009, but the prospective homeowner who hopes to buy a home at the bottom is taking a huge risk that he or she will be able to qualify for a mortgage, not only because mortgage rates are currently at historic lows, but the high LTV (loan-to-value) programs that are currently backed by the government may no longer exist.

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A study conducted recently found that the percentage of households that could afford to buy an entry level home in California stood at 53 percent in the third quarter of 2008.  That’s more than double for the same period from a year ago when only 24 percent of households could qualify.

The First-Time Buyer Housing Affordability Index study conducted by the California Association of Realtors found that the minimum household income needed to purchase an entry-level home at $287,760 in California in the third quarter of 2008 was $56,100, based on an adjustable interest rate of 5.91 percent and assuming a 10 percent down payment.  At $56,100, the minimum qualifying income was 44 percent lower than a year earlier when households needed $100,500 to qualify for a loan on an entry-level home.

In Los Angeles County the index stood at 42 percent, up from 20 percent a year ago. The L.A. entry-level price of $332,680 requires a minimum-qualifying income of only $64,800 and comes with a monthly loan payment of $2,160. A condo can start near $100,000 and will require less income.

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