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NEW YORK (MainStreet) — You think the housing market is a mess? Well, the National Association of Realtors has found a silver lining in this dark cloud, describing this as “The Golden Age of Affordability.”

That doesn’t mean you should rush out to buy a new home. Affordability is really a personal matter that can’t be measured well with nationwide statistics, but the NAR has a point: If home prices fall faster than incomes do, or fall when incomes rise or stay flat, homes become more affordable. It’s simple arithmetic.

“Today’s record low mortgage rates and high household incomes have created a very favorable buying environment in terms of affordability,” the NAR says in its recent market assessment. “In fact, the NAR Housing Affordability Index is at an all-time high, since NAR began measuring affordability in 1970.”

The affordability index is designed so a score of 100 means a household with a median family income can afford a median-priced home, assuming a 20% down payment.

That means three factors determine affordability: household income, home prices and mortgage rates. If income and home prices stay the same but mortgage rates decline, homes would become more affordable because the monthly payment on a given loan would be smaller. Obviously, higher income or lower home prices would also make homes more affordable, assuming interest rates stayed flat.

The latest figures show the affordability index at about 184 in November, up from about 115 in 2007, when homes were less affordable because of higher prices and mortgage rates.

Back then, at the peak of the housing bubble, the median home cost $217,900, the average 30-year fixed-rate mortgage charged about 6.5%, and the median family income was $61,173.

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By this past November, the median income had drifted up only slightly, to about $61,819, but the median home price had fallen substantially, to $171,300, and the mortgage rate had plummeted to about 4.5%.

As a result, in November it took an income of only $33,504 to qualify for a mortgage on a median-priced home, down from $52,992 in 2007.

Use BankingMyWay's Maximum Mortgage Calculator to determine how much home you can afford, based on your income, debts and current interest rates.

Historically, many home buyers have taken out the biggest mortgages for which they could qualify, often in the belief that a more expensive home is a better investment. In fact, homes are not terribly good investments once interest costs, taxes and maintenance expenses are added to the calculation.

And millions of homeowners who borrowed as much as they could came to regret it over the past few years, when falling home prices left them owing more than their properties were worth. They might still have lost money if they’d bought cheaper homes, but the damage wouldn't have been as bad.

Also keep in mind that home affordability involves a certain amount of guesswork. A home that seems perfectly affordable today might not be if your household income were to fall, or if other expenses went up.

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