Housing affordability rose strongly in 2001's final quarter as low interest rates helped keep homeownership within reach of hundreds of thousands of Americans despite the then-ongoing economic recession, according to the National Association of Home Builders' Housing Opportunity Index (HOI).

"Low interest rates and a competitive market made housing more affordable to the average buyer during the fourth quarter of 2001," said Gary Garczynski, NAHB president and a builder/developer from Woodbridge, Va. "Consequently, housing's strong production and sales, along with its 14 percent contribution to the nation's Gross Domestic Product, helped cushion the effects of the post-Sept.-11 slowdown that crippled other parts of the economy."

Garczynski noted, however, that despite the latest good news, the country still confronts a silent housing affordability crisis. "Millions of Americans are still priced out of the market," he said.

Based on an analysis of more than 600,000 completed home sales in 181 markets nationwide, NAHB's quarterly Housing Opportunity Index (HOI) rose more than two points to 64.1 in the final three months of 2001. The HOI is a measure of the percentage of new and existing homes sold that a family earning the median income can afford to buy. The latest HOI indicates that 64.1 percent of all new and existing homes sold across the country during October, November and December of 2001 were affordable to households earning the median family income of $52,500.

Attributing the favorable sales environment primarily to low interest rates, Garczynski reported that the average rate on adjustable- and fixed-rate mortgages, which NAHB uses to calculate the HOI, fell for a fifth straight quarter to 6.71 percent at year-end 2001 - the lowest this measure has ever been in the history of the HOI.

The nation's most affordable housing market in last year's fourth quarter was Rockford, Ill., which retains this title from the previous quarter but nevertheless improved its standing, with an HOI of 95.8 - up substantially from its third-quarter HOI of 89.4. "A remarkable 95.8 percent of homes sold in Rockford between the beginning of October and end of December 2001 were affordable to those earning the area's median family income of $57,100," Garczynski explained. The median sales price of Rockford homes sold during the period was $90,000.

Indianapolis, Ind., at No. 10 on the affordability chart, was the highest-ranked city among those with populations of more than one million people. There, 87 percent of homes sold in 2001's final quarter were affordable to those earning the median family income of $60,700, with the median price of homes that were sold pegged at $129,000.

After a brief hiatus, San Francisco returned to the bottom of the affordability chart, where it has been every quarter since the HOI was instituted in 1991 except for the third quarter of 2001. In last year's final quarter, just 8 percent of homes sold in San Francisco were affordable to those making the area's median family income of $80,100. The median price of San Francisco homes sold during the period was $520,000.

The Midwest was once again the most consistently affordable region for housing at the end of last year, with 14 entries on the "25 Most Affordable Metro Areas" list, while the South had eight markets on that list, the Northeast had three and the West had one. Conversely, the West had 19 entries on the "25 Least Affordable Metro Areas" list, while the Northeast had six and the Midwest and South went unrepresented there.

The most affordable metro areas by region in the final quarter of 2001 were: Syracuse, N.Y. in the Northeast; Rockford in the Midwest; Wilmington-Newark, Del.-Md. in the South; and Anchorage, Alaska in the West. The least affordable metro areas by region were: Portsmouth-Rochester, N.H.-Maine in the Northeast; Ann Arbor, Mich. in the Midwest; Laredo, Texas in the South; and San Francisco in the West.

Garczynski noted that sales of newly built and existing homes hit new records of 906,000 and 5.3 million, respectively, in 2001, partly on the strength of brisk sales activity when affordability spiked in the fourth quarter. "Keep in mind that for every home sold, thousands of dollars in home-related purchases are pumped back into local economies," he added.

Buyers of newly built homes spend an average of $8,900 on furnishings, decorations and improvements in the first year of homeownership, while buyers of existing homes spend $3,766 more than non-moving home owners in that period. Also, building 100 single-family homes generates 250 jobs in the local economy and $1.4 million in new local taxes and fees in the first year of construction, with additional positive impacts in subsequent years.

Results of the fourth quarter 2001 HOI can be downloaded online at: http://www.nahb.com/news/hoitables.xls.

Editor's Note: The Housing Opportunity Index is based on the median family income, interest rates, and the price distributions of homes sold in each market in a particular quarter of a year. The price of homes sold is collected from actual court records by First American Real Estate Solutions, a marketing company. The median family income for each market is calculated by the Department of Housing and Urban Development.