In 2002, about 56 percent (+/–0.7) of American families (current owners as well as renters) could afford to purchase a modestly priced home or condominium in the state where they lived. That is, they could afford to purchase a modestly priced home with cash or could qualify for a 30- year conventional mortgage with a 5 percent down payment. Ninety-six percent of this group currently own their homes. A modestly priced home is one that is less expensive than 75 percent of all owner-occupied homes in the area of residence (Table 1).
The percentage of families able to buy a modestly priced home was lower in 2002 than in 1984 or 1988, when about 60 percent (+/–1.0 in 1984, +/–0.5 in 1988) could afford such a purchase, and in 1991 and 1993, when about 58 percent (+/–0.8 in 1991, +/–0.6 in 1993) of families could afford to purchase a modestly priced home. It was about the same as in 1995, the last time affordability measures were developed (Table 1).
About 8 percent (+/–0.5) of total renters could afford to buy a modestly priced home in 2002—less than the 10 percent (+/–0.6) of renters who could afford such a purchase in 1995 (Table 1).
About 13 percent (+/–2.0) of non-Hispanic White families who were renting in 2002 could afford a modestly priced home, compared with 2 percent (+/–2.2) of Black families who were renting (Figure 2).
Renter families in 2002 were usually disqualified from purchasing a modestly priced home for more than one reason (lack of down payment, excessive debt, or insufficient income). About 67 percent (+/–1.3) of renter families did not qualify because of insufficient cash (including excessive debt) and insufficient income for a mortgage (Table 4). Current Housing Reports By Howard A. Savage • Sufficiently large down payment subsidies would do more to improve affordability of a modestly priced home than lower down payments (which would also increase monthly mortgage payments) or reduce interest rates. Subsidies would, however, require funding from a private source, such as employers, home sellers, nonprofit groups, or a governmental agency (Table 5).

Appendices

Appendix A. Overview of the SIPP Program [<1.0 MB]

Appendix B. Definitions and Explanations [<1.0 MB]

Appendix C. Methodology [<1.0 MB]

Appendix D. Data Quality [<1.0 MB]

Appendix E. Value of Criterion Homes, by Geographic Area [<1.0 MB]

Appendix F. Source and Accuracy of the Estimates [<1.0 MB]

Tables

Effect of Policy Changes for Black and Hispanic Origin Families and Unrelated Individuals

Table 5-7. Effect of Changes in Interest Rate for a Median-Priced Home [<1.0 MB]

Table 5-8. Effect of Changes in Interest Rate for a Modestly Priced Home [<1.0 MB]

Table 5-9. Effect of Different Down Payment Subsidies for a Median-Priced Home [<1.0 MB]

Table 5-10. Effect of Different Down Payment Subsidies for a Modestly Priced Home [<1.0 MB]

Table 5-11. Effect of Changes in Required Down Payment for a Median-Priced Home [<1.0 MB]

Table 5-12. Effect of Changes in Required Down Payment for a Modestly Priced Home [<1.0 MB]

Related Information

Housing Affordability Publications

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Who Can Afford to Buy a House in 2002?

Who Can Afford to Buy a House in 2002?

Highlights

Appendices

Tables

For Families and Unrelated Individuals

Median-Priced Homes

Modestly Priced Homes

Affordability Historical Tables

Effect of Policy Changes

Effect of Policy Changes for Black and Hispanic Origin Families and Unrelated Individuals