Housing affordability improves
The National Association of Home Builders, which released its NAHB/Wells Fargo "housing opportunity" index this week, calculated that 57 percent of the new and existing homes sold in the first three months of this year in the Baltimore metro area were in price ranges affordable to families making the area's median income. Less than half the homes sold in the last three months of 2007 fit the same criteria.
The low point in the 17-year index was the spring of 2006, when the median-income family could afford just 41 percent of the homes that sold in the Baltimore metro area. (The index defines a home as affordable if the typical household wouldn't have to spend more than 28 percent of its income on the mortgage payments.)
The home builders take into account fluctuating interest rates as well as changing prices and incomes. In the first quarter of this year, according to the figures they track, interest rates fell, incomes rose and prices dropped.
The Baltimore area ranks 123rd out of 223 metros for affordability, with 1 being most affordable. It was 31st in the spring of 2000, when three-quarters of the homes that sold were in the typical family's price range.
Nowadays, the area's median family income is $78,000 and the median home price is $250,000, the home builders say.
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Comments
Yes, and it's also something to think about when discussing the foreclosure "crisis". Those of us who have been saving these past few years instead of signing insane mortgages are more able to afford a house now.
Just because it's bad for used house salesmen doesn't mean it's bad for everyone.
Posted by: Marc | May 23, 2008 4:42 PM
Alas, the negative implications of foreclosures are rippling far beyond the people losing their homes and the people trying to sell them. Foreclosures are bad for lenders (which is why it's harder to get a mortgage now), bad for neighborhoods (vacancy, blight, crime), bad for local tax collection -- I'm probably leaving something off the list. (Oh -- bad for renters whose landlords default.)
This is why stories focusing on the downside outnumber those following the "hooray for cheaper homes!" trend -- because the impact to the economy is significant.
Posted by: Jamie Smith Hopkins | May 23, 2008 4:48 PM
Hi Jamie, I understand that the impact on the economy is significant - but why should the housing not be simply "owned shelter" instead of gamble? The problem with gambling, you see, is that it is great as long as one wins. But one can also lose...so, when one sees the consequences, it is obvious that economy should move one to some other wealth parameters.
Posted by: LennieTheBruce | May 23, 2008 11:14 PM
Hi, LennieTheBruce -- housing shouldn't be a gamble. People drawing lessons from the housing boom and bust generally put that at the top of the list.
I recall reading a book once -- long ago -- that even disputed the "your home is your biggest investment" argument because you can't put that investment to work for you in the traditional sense as long as you want to live in it. (Of course, that was before people began pulling big chunks of equity out of their homes through lines of credit.)
Posted by: Jamie Smith Hopkins | May 24, 2008 6:26 AM