The Hill
(5/14/2013 12:10 PM, Vicki Needham)

House hunters are the beneficiaries of a historically high affordability conditions that could help further propel the housing sector's improvement.

In all, 73.7 percent of new and existing homes sold between the January through March quarter were affordable to families earning the U.S. median income of $64,400, according to a National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), released on Tuesday.

The figure is down slightly from the 74.9 percent in the final quarter of last year. The index has not dropped below 70 since the end of 2008.

"Thanks to very favorable mortgage rates and prices, housing affordability has remained quite high over the past four years," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.

"From a builder's perspective, it should be noted that rising costs for building materials, lots and labor are making it somewhat more expensive to construct new homes in today's market."

Trulia, a group that tracks trends in the housing market, introduced on Tuesday a gauge that compares current home prices to the sharp rise during the housing bubble.

Although home prices are rising nearly as fast as they did during the peak bubble years of 2005-2006, at this point, housing prices are still undervalued by 7 percent. During the first few months of 2006, prices were 39 percent overvalued.

Only eight of the 100 largest metros overvalued, signaling a rebound instead of another dangerous bubble situation, according to the analysis.

The group doesn't expect to see prices rise like they did leading up to the housing crash because more inventory and, eventually, higher mortgage rates will cool the increases.

The most undervalued metros today are Las Vegas and Detroit – despite recent price gains in those markets. Several Florida and Ohio metros are also among the most undervalued. "The bottom line is that, for consumers who can qualify for a mortgage at today's attractive rates, the majority of homes being sold remain within their grasp in markets nationwide," said David Crowe, NAHB's chief economist.

Ogden-Clearfield, Utah tops the list of affordable major markets followed by Indianapolis-Carmel, Ind.; Lakeland-Winter Haven, Fla.; Youngstown-Warren-Boardman, Ohio-Pa.; and the two New York metros of Syracuse and Albany-Schenectady-Troy tied for the fifth position.

Among smaller housing markets, Mansfield, Ohio, ranked first followed by Cumberland, Md., Fairbanks, Alaska; Springfield, Ohio; and Dover, Del.

This was the second consecutive quarter in which the San Francisco-San Mateo-Redwood City, Calif. metro area hit the bottom of the affordability chart for major markets.

Other major metros at the bottom of the affordability chart included New York-White Plains-Wayne, N.Y.-N.J. and the three California metros of Santa Ana-Anaheim-Irvine; Los Angeles-Long Beach-Glendale; and San Jose-Sunnyvale-Santa Clara.

In his weekend address, President Obama touted the benefits of homeownership and the positive developments in the housing market of increasing sales and a drop in foreclosures. He reiterated that he still wants to expand refinancing for homeowners, including those who are underwater on their mortgages.

He called Rep. Mel Watt (D-N.C.), his nominee to head up the Federal Housing Finance Agency (FHFA), the "right person for the job" calling on Congress to "confirm him without delay."

Watt would likely start principal reductions for some struggling homeowners, a policy that acting Director Edward DeMarco has said would put taxpayers' investment at risk.