Green Is Here to Stay Housing Affordability, Stability Edge Up Help More Buyers Seal the Deal

April/May 2007 Housing Affordability, Stability Edge Up The housing industry may not be entirely out of the woods yet, but many industry experts expect the dramatic slides of 2006 to give way to a more stabilized economic environment this year. Affordability, a key factor in home sales and thus market stability, has been showing positive trends. Gains in employment and personal income, and a historically low interest rate structure are also supporting the move toward stabilization, according to David Seiders, NAHB chief economist. In addition, builders have taken solid steps toward helping the market balance out, using price and non-price incentives to bolster sales and reduce inventory, he adds.1 Advances in Affordability While regional trends have a strong influence on affordability, figures nudged up nationwide in fourth quarter 2006, according to the NAHB. As the sub-prime market adjusts to recent loan performance trends, affordability ratios may experience new downward pressures. · Nationwide Housing Affordability: 41.6% An increase of 1.2% from third quarter 20062 · Most Affordable Metro Area: Indianapolis 89% of homes affordable; $113,000 median sales price2 · Least Affordable Metro Area: Los Angeles-Long Beach-Glendale, Calif. 2% of homes affordable; $525,000 median sales price2 Signs of Stability Under current market conditions, the general decrease now being seen in housing starts is actually a positive sign. “Builders have been cutting back on starts of new units to bring supply and demand back into balance,” explains Seiders 1 “New Home Sales Drop in January Following Early-Winter Sales Gains,” National Association of Home Builders (NAHB) press release, Feb. 28, 2007 2 “Indianapolis Remains Nation’s Most Affordable Housing Market,” NAHB press release, Feb. 22, 2007 3 “Housing Starts Drop 14.3 Percent in January as Builders Manage Inventories of Unsold Homes,” NAHB press release, Feb. 16, 2007 4 “New Home Sales Drop in January Following Early-Winter Sales Gains,” NAHB press release, Feb. 28, 2007