David Lereah, the association's chief economist, said it is important to put the decline in perspective. "Housing-affordability conditions for the U.S. as a whole have been so favorable that even with a decline, the current reading is quite good," he said. "The last time the affordability index was at this level was in the second quarter of 2002, and that was a record year for home sales."

The index shows the nation's typical household had 133.6 percent of the income needed to purchase a home at the median existing-home price in the second quarter, which was $183,800. This index measures affordability factors for all home buyers making a 20 percent down payment, with an index of 100 defined as the point where a median-income family has the exact amount of income needed to purchase a median-priced existing home. The second-quarter median family income was projected to be $54,884.

In contrast, the minimum household income needed to purchase a median-priced home at $465,160 in California in May was $108,450, based on a typical 30-year, fixed-rate mortgage at 5.77 percent and assuming a 20 percent down payment.

National Association of Realtors President Walt McDonald said the typical household is well poised to buy a home in most of the country. "The average buyer could afford to buy a home costing nearly 4.5 times their income in the second quarter," he said. "Even so, the median-income family spends just over 3.3 times their income for a home, meaning housing continues to be an excellent investment. Affordability conditions are expected to be fairly stable during the second half of the year, which will contribute to a new annual record for home sales."

In the second quarter, a median-income household could afford to buy a home costing $245,600, which is well above the national median price of $183,800.

According to the Federal Housing Finance Board, the average effective mortgage interest rate for existing homes was 5.73 percent during the second quarter. This is a weighted average interest rate between fixed and adjustable loans, including the cost of points, and represents a true bottom-line mortgage cost.

Affordability for first-time home buyers also declined in the second quarter, down 6.4 percentage points. The association's First-Time Homebuyer Affordability Index shows a typical first-time buyer household, aged 25 to 44, with an income of $31,103, had 77 percent of the income needed to purchase a typical starter home with a 10 percent down payment. The median starter-home price was $156,200 during the second quarter.

The index shows the typical first-time buyer could afford a home costing $120,300. "First-time buyers are in a fairly good position in most of the midsection of the country, but in higher-priced markets they have to make some adjustments," McDonald said. "In reality, entry-level buyers are making smaller down payments--in the range of 3 to 6 percent--and are using loan programs to afford more house for a given income."