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Market showing light for home buyers

With house prices retreating in the first quarter of 2011 home buyers are moving closer to affording their dream home.

"The housing market has responded to a higher interest rate environment following the series of rate hikes throughout the course of 2010, which can be seen in some softening in dwelling prices," said HIA senior economist Andrew Harvey.

"Improved affordability is great news for home buyers, particularly first-home buyers with sound financial positions who have been considering entering the market in 2011."

HIA stated that despite the housing affordability index rising by 3 per cent in the March 2011 quarter, affordability remained 2.8 per cent below the March 2010 quarter level.

Chris Zappone from The Age reported that for the month of March the Australian housing market recorded home prices falling by 2.1 per cent however the national city median home price stood at $455,000 according to property research group RP Data/Rismark.

The latest report from the HIA Economics group shows affordability is making positive movement across most states with Perth making the biggest shift to affordability with 6.1 per cent increase.

The second biggest shake up was Hobart's 4.1 per cent affordability increase.

Sydney came in at 2.5 percent leaving Melbourne and Brisbane to fight it out at equal fourth with 1.6 per cent closely followed by Adelaide with 1.5 percent and Canberra falling .9 per cent.

Looking to the future it is possible to see further falls in home prices as a result of Melbourne and Sydney's auction clearance rates sinking to the 60 per cent level or lower in 2011 compared to last years 80 per cent clearance level.

Affordability in the HIA-CBA Report is based on the "long standing premise that housing costs should not consume more than 30 per cent of a household's income".

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