
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, February 13, 1991                   TAG: 9102130117
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

FIRST-TIMERS CAN ALMOST AFFORD A HOME/ FALLING PRICES AND INTEREST RATES BOOS

Falling prices and mortgage rates boosted the purchasing power of typical first-time home buyers in the fourth quarter of 1990, but they still didn't have the money to afford a typical entry-level home, a real estate trade group said Tuesday.

The National Association of Realtors said its first-time home buyer affordability index measured 81.5 points for the October-December period, meaning the typical entry-level buyer had 81.5 percent of the income needed to qualify to buy the typical starter home.

The index, up from 75.7 in the previous quarter, was the highest since it measured 83.9 in the first quarter of 1978. But it remained 29.7 percent lower than the 115.9 index measuring the affordability of all buyers of existing homes.

"Each time mortgage rates drop, the market opens up to more first-time buyers," said Realtors President Harley E. Rouda.

The interest rate used to calculate the index dropped from 10.29 percent in the third quarter to 10.17 percent in the fourth quarter. The rate consists of the contract rate plus fees or points paid at settlement and the cost of private mortgage insurance.

At the same time, the national median price of a starter home fell 5.1 percent, from $82,100 to $77,999, while the median income of prime first-time buyers inched up $291, from $24,137 to $24,428.

The interest rate, price and income changes resulted in a typical monthly payment of $624, down $40 from the typical payment in the third quarter.

Nevertheless, the typical first-time buyer earned $5,537 less than the $29,965 median income needed to qualify for conventional financing covering 90 percent of the median-priced home, the Realtors said.

by CNB