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The housing affordability index (HAI) by the Realtors® has been on a steady climb since last August, and in February the HAI got back to the level that had prevailed in early 2004 — just prior to the massive downslide in this measure. Recent improvements have been driven by large declines in median home prices and mortgage interest rates as well as by growth in median family income.

The University of Michigan’s home buying conditions index (HCI), based on the monthly surveys of consumer sentiment, also has climbed off the deck since last summer, although this measure remains well below the highs of 2002-to-2004.

More than half of consumers saying that home buying conditions were “good” in February cited lower house prices, and about one-fourth cited low interest rates.

The major rebound in the HAI and the lesser rebound in the HCI have not yet been reflected in actual home sales. One key reason is a dramatic tightening of mortgage lending standards, as reflected in higher downpayment requirements, lower allowable debt payment-to-income ratios and higher required credit scores.

The HAI simply cannot capture shifts in these conditions, and it’s likely that most consumers who are rating home buying conditions for the University of Michigan are not fully aware of what’s happened to mortgage lending standards.

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