Declining home prices and rising family income boosted housing affordability to a two-year high in September, the National Association of Realtors reported this week.

The association's housing affordability index, which measures the ability of the average family to buy a home, reached 110.9 in September, meaning that the family would have more than enough income needed to qualify for conventional financing.

The index stood at 107.5 percent in August, the association said. The national median family income rose to $35,239 last month from $35,125, while the median price of a home dropped to $94,300 from $97,100.

The income needed to qualify for a conventional mortgage dropped to $31,778 last month from $32,666 in August.

Changes in median home prices, median family income and the average mortgage rate between August and September caused a $19 decline in September's average monthly mortgage payment of $662.

Because the national median income in September was greater than the qualifying income, a family earning the median income could purchase a home priced at $104,578, or $10,278 higher than September's median price, and the highest price on record that the median family could afford.

Norman Flynn, the association's president, said September's affordability index indicates that the economic slowdown gripping much of the nation may not be as severe as first thought.

"Although some buyers seem to be putting their home buying plans on hold due to the slow down of the economy, the housing affordability index indicates that conditions are better than people think," Flynn said.

Flynn said fears of an "imminent housing crash" are unfounded, but added that the association is predicting a "mild" recession to last through the second quarter of next year.

Still, Flynn said, the lure of more affordable housing has not been strong enough to pull buyers into the market.

The Commerce Department reported this week that sales of new single-family homes slipped 6 percent in September from August and slid a sharp 21 percent from year-earlier levels. So far this year, new home sales are down 15 percent.

According to the association's index, a family earning $20,000 would have enough income to qualify for a $59,300 house with a $47,400 loan. A family earning $30,000 would qualify for an $88,900 house with a $71,100 loan and a family earning $40,000 would have sufficient income to qualify for a $118,500 home with a $94,800 loan.

Families earning $50,000 would have enough income to qualify for a $148,100 home using a $118,500 loan.