TUSCALOOSA, Al. - The Alabama Housing Affordability Index (HAI) declined during the second quarter of 2000, the second straight decline for the Index this year.

According to figures released by the Alabama Real Estate Research and Education Center at The University of Alabama, the statewide HAI fell 4.8 percentage points to 157.7, down from 162.5 in the first three months of the year. For the first half of the year the Alabama HAI is down almost 6.4 percentage points.

"The principal culprit appears to be the increase in mortgage interest rates that occurred during the second quarter," said Dr. Leonard Zumpano, director of the center. "The average, blended mortgage rate, which includes fixed rate and variable rates, increased by 16 basis points or slightly less than a quarter of a percentage point. This is in addition to the almost 30 basis point increase in mortgage interest rates that occurred during the first quarter. The most recent quarterly increase in rates added about $5 a month to the median mortgage loan payment, compared to the last quarter."

At the national level, housing affordability also declined during the second three months of the year, according to center statistics. The U.S. housing affordability index fell from 131.1 in the first quarter to 126.6, virtually the same percentage decline as occurred in Alabama.

"However," Zumpano said, "housing is about 20 percent more affordable in Alabama than is the case in the rest of the country.

The statewide housing affordability index is calculated as the ratio of the state’s actual median income to the family income required to finance the purchase of the median priced home in the state. An index number of 100 means that a family earning the median income has just enough buying power to qualify for a mortgage loan on the median priced, existing single-family house, given standard underwriting criteria. The higher the index number the better, as housing is more affordable.

Within Alabama, housing affordability, as measured by the HAI, decreased in nine of the state’s 11 metropolitan areas during the second quarter. In every case these were the same metro areas that reported an increase in median home prices during the period.

"The two metro areas showing an increase in housing affordability, Auburn-Opelika and Decatur, both reported a fall in median home prices," Zumpano said. "These results are consistent with an existing housing market that continues to expand."

The recent monthly housing statistics reported by Alabama Real Estate Research and Education Center indicates existing homes sales rose statewide and the market expansion was broad-based, with existing home sales increasing in 16 of the 20 reporting locations.

Zumpano said the most recent housing affordability data suggests that the Federal Reserve’s past credit policy is beginning to have an effect on the cost of housing but has done little to dampen consumer demand, at least for existing homes. The most recent Gross Domestic Product numbers, which indicate that the U.S. economy grew faster than expected during the second quarter, are likely to encourage additional interest rate hikes by the Fed in coming months.

"If that does happen," Zumpano said, "we should see the existing housing market slow down during the second half of the year."

The Alabama Real Estate Research and Education Center is part of The University of Alabama’s Culverhouse College of Commerce and Business Administration. The UA business school, founded in 1919, has been recognized repeatedly during the 1990s for offering a high-quality, cost-effective education.