For Housing Affordability, Midwest Leads Nation While West Trails

HOUSING became more affordable throughout much of America in late 1995, thanks to falling prices and lower mortgage rates.

"Housing affordability improved across the country in the fourth quarter as interest rates fell from about 8 percent in the third quarter to below 7.5 percent by the end of the year," said Randy Smith, president of the National Association of Home Builders. The association released its quarterly Housing Opportunity Index on Wednesday.

Homes in Kansas City and Minneapolis were among the best buys nationally. In fact, 13 of the 25 most affordable markets were in the Midwest. The Northeast and South each had six.

The West had 18 of the least-affordable markets, including 11 in California. Four more were in the Northeast and three were in the South.

Lima, Ohio, regained its title as the least expensive housing market in the nation. A small city in the northwest part of the state, Lima ranked fourth in the third-quarter index, and last held the top spot in the fourth quarter of 1994.

The survey found that affordability improved in many other markets. In fact, the nation had a 63.4 reading on the index, up from 61.3 from July through September and suggesting greater purchase opportunities.

The index measures the proportion of homes sold in a specific market that a family earning the median income could afford. The median is the midpoint, meaning half the families earn more and half earn less.

The drop in interest rates during the fourth quarter meant a monthly savings of $35 on a $100,000 fixed-rate, 30-year mortgage. In addition, the Home Builders said, the median home price dipped to $117,000 from $118,000.

But after falling to a two-year low of 6.94 percent in mid-February, rates began rising, reaching 7.83 percent in mid-March before falling back to 7.69 percent last week.

Analysts say that for every percentage-point increase in interest rates, 250,000 to 300,000 American families are priced out of the market.

Regionally, the most affordable housing markets were Lima in the Midwest; Binghamton, N.Y., in the Northeast; Baton Rouge, La., in the South; and Billings, Mont., in the West.

The least-affordable markets were Chicago in the Midwest; New York in the Northeast; Laredo, Texas, in the South; and San Francisco in the West.