Falling FHA home prices

8/25/2008

FHA home prices continue to dwindle across the country, making homes more affordable in most U.S. cities, according to a new report released Tuesday.

Nationally, 55% of homes sold from April through June were affordable to veterans earning the U.S. median income of $61,500, according to a quarterly report released Tuesday by the National Association of Home Builders (NAHB).

That's up from 53.8% in the first quarter of 2008, and the most affordable FHA home prices have been since the second quarter of 2004.

"FHA homes became more affordable because median income and interest rates remained about the same throughout the country, as home prices continued to fall," said Gopal Ahluwalia, an NAHB economist.

Median FHA home prices dropped to $215,000 in the quarter, which are about 10% below year-ago levels of $240,000, according to NAHB.

"This is definitely positive news, because more people can afford to buy a home," said Ahluwalia. "Still, actual sales haven't picked up, because people are waiting ont he sidelines as they fear FHA home prices will continue to decline."

Falling home sales have battered the homebuilding industry.  The NAHB study followed a Census Bureau report also released Tuesday that showed home building fell sharply in July to a 17-year-low.  Monday, a monthly NAHB report showed homebuilders' confidence in the FHA housing market remained at record low levels.

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