Affordability of US homes reaches new record

US homes are now more affordable than at any time since the National Association of Realtors began tracking affordability in 1970.

The finding, announced Tuesday morning by the National Association of Realtors (NAR), means that family incomes are high enough and mortgage rates and real estate prices are now low enough that homeownership is within the reach of a record number of Americans.

First sales upturn since August

This combination of events has sparked the first nationwide upturn in housing sales since August 2008, according to the NAR's index of pending home sales, also released Tuesday morning. The index jumped from a record low of 82.5 in November to 87.7.

The biggest jumps were in the South (up 13 percent from the previous month) and the Midwest (up 12.8 percent). The West and Northeast saw small declines.

The index suggests that sales of existing homes should also see an increase in one to two months.

Caution ahead

While welcome, the bounce is modest, the NAR warned in a statement, and offers no guarantee that home prices won't continue to fall.

“Significant uncertainty still clouds the housing market despite improved affordability conditions," Lawrence Yun, NAR chief economist. "For a sustainable housing market recovery and, hence, sustainable economic recovery, we need a significant housing stimulus and mortgage availability for qualified borrowers.”

Senate minority leader Mitch McConnell is proposing that the stimulus package jump-start the housing market by pushing mortgage interest rates down through government purchases of private mortgages.

But a continued decline in housing prices could swamp such efforts, many analysts say.

No quick turnaround?

"You can't take a downturn this severe and expect it to turn around" quickly, says Andrew Caplin, a professor of economics at New York University. "This will be a problem that will be with us for some years. And we should settle in for the medium term."

Instead, he proposes that government target homeowners with troubled mortgages, writing their loans down immediately but with the provision that the government would share in any appreciation when the homeowner sells the property.