PR.com: Business Directory, Press Releases, Jobs, Products, Services, Articles
 
Businesses Articles Press Releases Follow @PRcom
Press Release Pricing | News by Category | News by Country | News by US Region | Recent News | PR.com News on Your Site
 

Press Releases

 
RE/MAX Northern Illinois

Press Release


Receive press releases from RE/MAX Northern Illinois: By Email RSS Feeds:

The Bright Side of Housing: Home Affordability Soars in Metro Chicago Real Estate Market, RE/MAX Reports


Elgin, IL, November 24, 2010 --(PR.com)-- The affordability of a classic single-family home has improved by 66 percent in the seven-county metropolitan Chicago real estate market over the last five years, according to a review by RE/MAX employing the traditional measure of home affordability developed by the National Association of REALTORS® (NAR).

In the third quarter of 2005, the affordability ratio in the metro area for the median priced four-bedroom, 2 ½-bath home was 81, while currently the ratio is 134.5, a 66 percent increase in affordability. To better interpret that result, it helps to understand how the home affordability ratio is calculated.

The NAR formula measures affordability by using three basic numbers: median family income, median home price and average mortgage interest rate on a 30-year fixed-rate loan. It then calculates the ability of a family earning the median income to afford the median priced home after making a 20 percent down payment. Principal and interest payments can be no more than 25 percent of the family’s annual income.

If 25 percent of family income exactly equals the required annual principal and interest payment, the affordability ratio is said to be 100. A result of less than 100 means a family earning the median income can’t afford the monthly payment on the median priced home, and the lower the number, the greater the deficit. On the other hand, an affordability ratio of 100 or more suggests the same family can afford the monthly payment, and the higher the number, the more affordable the home would be.

In the third quarter of 2005, the median price of a four-bedroom, 2 ½-bath single-family home in the metro Chicago market was $360,000. According to the Federal Housing Finance Agency, the median family income for the Chicago metro area was $66,007, and the prevailing interest rate on a 30-year mortgage was 5.83 percent. The monthly payment required after a 20 percent down payment was $1,695.35.

In the third quarter of this year, median family income as estimated by the U.S. Department of Housing and Urban Development was $75,100 in the metro area, and the median price for the same four-bedroom, 2 ½-bath home was $288,250, or 20 percent less than five years earlier. The average interest rate on a 30-year fixed-rate loan had declined to 4.46 percent. The monthly payment was $1,162.94, a savings of $533 a month.

“The difference between the monthly payment required in 2005 and that needed today to buy a similar home is absolutely striking and makes it clear why the current market is a remarkable buying opportunity,” said Jim Merrion, regional director of the RE/MAX Northern Illinois real estate network.

Affordability also has improved in the condominium market. During the third quarter of this year the median price of two-bedroom, two-bath condo units in the metro Chicago real estate market was $205,500, and the affordability ratio was 189. In contrast, the median price for the same type of unit in the third quarter of 2005 was $265,000 and the affordability ratio was 125.

Merrion noted that the NAR affordability ratio is not all encompassing. For example, it does not account for condominium assessments or property taxes or even for other regular monthly payments a family may have, such as student loans, credit card debt or car payments.

“Still, it is a valid measure of the relationship between home prices, interest rates and family income over time,” he said.

Here are the current affordability ratios for the median priced four-bedroom, 2 ½-bath home in a dozen Chicago-area communities based on the current $75,100 family median income in the metro area: Chicago/North Center 58; Chicago/Beverly 114; Crystal Lake 154; Flossmoor 227; LaGrange 66; Mundelein 149; Mt. Prospect 115; Naperville 101; Northbrook 79; Oak Park 76; Orland Park 104; St. Charles 120.

RE/MAX is the leader in northern Illinois real estate sales. It has been number one in the metropolitan Chicago real estate market since 1989, closing more than $6 billion in sales last year. The RE/MAX Northern Illinois network consists of 2,500 associates and 120 individually owned and operated RE/MAX offices that provide a full range of brokerage services throughout the northern one-third of Illinois. Its www.illinoisproperty.com and www.remax.com websites are leaders in consumer visits among real estate brokerage brands. The northern Illinois network is part of RE/MAX LLC, a global real estate organization with 91,000 sales associates in 83 nations.

###
Contact Information
Jim Nathan
773-588-0777
Contact
www.illinoisproperty.com

Click here to view the list of recent Press Releases from RE/MAX Northern Illinois
Promote Your Business