NAR Housing Affordability Index Useless
REALTOR Group's Housing Affordability Index Says Housing Has Never Been Unaffordable
According to this Seeking Alpha article, What's Wrong with the NAR Affordability Index?, the National Association of REALTORS (NAR) Housing Affordability Index (HAI) is utterly useless. The article states "housing never dipped into the level of unaffordable over the entire giant housing boom. This is mind bogglingly astonishing. If the affordability index failed to show housing was unaffordable during 2005-06, when would it ever show that?" In short, according to the NAR Housing Affordability Index (since 1989 when the HAI was created) housing has never been "unaffordable" (see graph below). This is absolutely absurd. How can prices fall so much from 2005 levels and those 2005 levels not be seen as unaffordable? It makes no sense and neither does the NAR HAI - it is absolutely useless.
As the graph indicates, a NAR HAI reading of under 100 means homes are relatively unaffordable. As you can see, the NAR HAI never goes below 100 so it means that NAR wants people to believe that homes have always been affordable. Therefore, when you hear NAR say "homes are affordable and interest rates are low, etc." please dismiss it as fools gold. It is a worthless statement. Unfortunately, the latest wave of buyers that purchased homes, particularly the first time tax credit buyers, fell victim to this nonsense and, as a result, many of them will be the next round of short sales and foreclosures.
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