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To: Box-By-The-Riviera™ who wrote (84921)	3/23/2001 6:09:33 PM
From: GraceZ	Read Replies (2) \| Respond to of 436258

I agree with you that prices tend to rise when rates go down because people buy houses by payments and they tend to buy as much house as they can. The selling price of the house is more important to the seller than the buyer (unless they have cash) when rates are falling. The way they figure out that affordability index is that they take the median house price and the median income and figure out what percentage of income needs to be spent on mortgage payments. This is expressed as an index, 100 being that the median income can afford the median house, 143.6 is significantly higher than it has been in some time. Incomes have not risen by the rate that the houses have so you have to assume that rates are putting in all the work by lowering payments. Now these figures that they think of as "affordable" strike me as too high, as I'm not comfortable with paying 28% of my income in mortgages pmts. but those are the qualifying figures that they use for mortgage approval. The thing you have to take into account is that this is median (not average) so half the houses are more and half are less, and different locations have completely different rates of housing appreciation. You may not want to live in a neighborhood that you can afford. There are plenty of areas of the country where housing prices are still going down, not up. The affordability index varied significantly by region. overall: 143.6 North East: 149.7 Midwest: 172.6 South: 145.8 West: 112.8 So you can see that a person in the expensive west might only need to consider living in the midwest if owning a house is something that is particularly important to them. People eventually do vote with their feet when they get priced out of a market, or the market has to adjust to the pool of buyers. Unfortunately expensive houses usually appreciate at a higher rate so someone in a less expensive region of the country who owns a house gets further away equity-wise from the owner in the more expensive house as time goes on, even if the mortgage payments allow them to sleep at night better.