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SAN FRANCISCO – Oct. 13, 2010 – Beacon Economics’ new Beacon Economics Home Affordability Index finds that in August homes were at their most affordable level since data became available (1969). Beacon Economics developed the Beacon Economics Home Affordability Index based on the percentage of income an average family would need in order to make mortgage payments on an average priced home.

The August estimate shows the cost of homeownership (mortgage interest plus principal payments after a 20 percent downpayment) falling to 16.9 percent from 17.1 percent in July. Overall, the Beacon Economics Home Affordability Index has remained below 20 percent for the past twenty-one months.

“Home affordability has reached an historic high,” says Beacon Economics Founding Principal Christopher Thornberg. “Nationwide, prices are down approximately 25 percent from their peak, and mortgage financing rates are at all-time lows.” Moreover, the high level of affordability is likely to drive demand and reduce the stock of excess inventory, ultimately resulting in the need for new housing, a rise in prices, and a pickup in new construction, according to Thornberg.

“While prices may fluctuate modestly over the next several months, we believe the worst of the housing crisis is behind us,” adds Beacon Economics Research Manager Jordan G. Levine. “We expect prices to stabilize around current levels and likely be higher in the next twelve months.”

Thornberg agrees. “Although there could be some modest volatility over the next several months, our research indicates the housing market is at or near the bottom,” he says.

The Beacon Economics Home Affordability Index is intended to help homebuyers and policymakers alike understand the current state of the market.