Originally published November 10, 2011 at 8:21 PM | Page modified November 11, 2011 at 11:38 AM

King County housing-affordability index best in 17 years

Thanks to declining prices and record-low interest rates, houses in King County are more affordable now than they've been in at least 17 years, a new score card says.

Seattle Times business reporter


Stable incomes, low interest rates also help buyers

Prices peak

King County median, 3rd quarter 2007


Hitting new lows

King County median, 3rd quarter 2011


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Thanks to declining prices and record-low interest rates, houses in King County are more affordable now than they've been in at least 17 years, a new score card says.

The county's "housing affordability index" score, a measure devised by the Washington Center for Real Estate Research at Washington State University, hit a record high of 127 in the third quarter.

That means a typical family's income was 27 percent higher than what it needed to make payments that won't bust the household budget on a median-price house.

The third-quarter score topped the previous high of 124.6, recorded in the second quarter of 1998. The all-time low — 65 — came in the third quarter of 2007, when home prices reached their peak. The median price of existing houses resold in King County in July, August and September that year was $472,000.

The median price for the third quarter this year was $350,000, the center's latest score card says, down 10.3 percent from the same quarter last year.

Interest rates also hit new lows, said Glenn Crellin, the center's director, and the county's median family income — despite persistent high unemployment — remained relatively stable.

"You put those three together and you get greater affordability," he said.

The median price of houses sold in King County in October — a month not included in the calculations — fell to a new post-bubble low of $320,000, according to Northwest Multiple Listing Service statistics released last week.

If that signals a trend, it could push the affordability score even higher, Crellin said.

To calculate the index score, which it has tracked since 1994, the center plugs in the county's median family income (a measure that excludes one-person households), the median price of all resold houses (not including new construction or condos), and the average interest rate on mortgage loans.

It assumes a 20 percent down payment and a 30-year fixed-rate mortgage. It also assumes 25 percent of the family's income will go to pay principal and interest.

Snohomish County's third-quarter affordability-index score was 171.5. It was 185.4 in Pierce County, 160.7 statewide.

Interest rates are the big driver in improving affordability, said Tim Ellis, who writes the real-estate blog

Prices have slipped to 2004 or 2005 levels, he said, but higher interest rates back then meant buyers were paying more each month on conventional mortgages.

"It's a great time to buy if you want to keep your monthly payments low," Ellis said.

By some measures, it's now cheaper to own than to rent in the Seattle area. Mortgage payments for median-priced condominiums are 35 percent lower than rent for the average two-bedroom, two-bath apartment in King County, apartment-research firm Dupre + Scott said in its October market report.

The standard mortgage payment on median-priced houses sold in the county in September is $400 a month less than rent on the typical house, it added.

But monthly payments aren't the only consideration when people decide whether to buy. Financing remains a problem for many, Dupre + Scott said, and many consumers, especially younger people, value the flexibility of renting.

Then there's the continuing slide in home prices. That makes some potential buyers hesitate, Ellis said — especially when they realize that just to break even, they must sell their homes for about 10 percent more than they paid to cover commissions, taxes and other closing costs.

Homeownership is dropping and will continue to do so, Brian Fritz, a vice president with apartment developer Avalon Bay Communities, said at a real-estate industry breakfast this week.

That's partly because more people who could buy are choosing to rent, he said: "They tell me, 'Why would I buy something that will be worth less tomorrow?' "

In addition to its overall housing-affordability index, the Center for Real Estate Research calculates an index for first-time buyers. That one assumes a lower down payment, slightly higher interest rate, lower income and less-expensive house.

King County's third-quarter score was 67.5, suggesting affording a starter home remains a challenge for many.

Still, it's probably less challenging than in the third quarter of 2006, when that index hit an all-time low of 38.6.

Eric Pryne: 206-464-2231 or

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