Housing affordability fell

The Housing Industry Association and the Commonwealth Bank released their Housing Affordability Index this week which showed that housing affordability fell during the December 2009 quarter by 18.4%.

In comparison to the December 2008 quarter, home loan affordability was 22.3% lower. The results were due to the halving of the First Home Owners Grant Boost at the beginning of the quarter, three successive interest rate increases by the Reserve Bank between October and December 2009 and residential housing values increasing by 11.1% during 2009.

The report highlights that affordability levels are now similar to those recorded during 2008 at a time when interest rates were significantly greater than current levels.

RP Data and Rismark International will release their January National Home Value Results today and it will be interesting to see how the market has performed during the typically quiet January 2010 period given that home values fell by -0.3% during December 2009. Despite the fact that values fell last December, key market indicators such as the Market Activity Index and listings data shows that there has been an above average level of real estate activity during early 2010.