Three ways of looking at housing affordability
We saw one way of measuring home-price affordability yesterday: What's the median price in your region, and how does that compare with the salaries for jobs such as police office and school teacher?
Another new report offers a different way: comparing typical income with housing costs plus the expense of getting from home to work.
The Center for Neighborhood Technology's H+T Affordability Index aims to get people thinking more broadly about the cost of living here vs. there, and whether settling far from work to save money is actually cost-effective.
Its page for the Baltimore metro area lets you look at two maps side by side: which parts are affordable based on the "spend less than 30 percent of your income on housing" rule of thumb, and which are affordable if you want to shell out less than 45 percent on housing and transportation combined.
By the center's calculation of the latter measure, few parts of the Baltimore metro area are affordable outside the city. According to the center, "increased transportation costs begin to offset savings on the cost of housing when commutes reach a distance of about ten miles."
"Families unwittingly shortchange themselves by being economical when it comes to housing
costs while taking on incremental travel costs that wipe out those savings," it says in its report, "Penny Wise, Pound Fuelish." (Very punny.)
The Maryland Department of Housing and Community Development takes a different tack: It analyzes affordability (or lack thereof) by offering up a stand-in for a first-time home buyer and a move-up buyer. By its calculations, move-up buyers in Baltimore can afford to purchase there, and likewise in the surrounding counties. But first-timers?
Only in the city and Harford County can they afford to make the leap without stretching, the state calculates. They fall particularly short if they're trying to buy in Carroll and Howard counties.
Here's how the state comes by that conclusion:
It's considering someone a move-up buyer if they can put 20 percent down and earn the median household income for their jurisdiction. It looks to see if that buyer can purchase the median-priced single-family home in that jurisdiction without spending more than 25 percent on principal and interest.
Its definition of a first-time buyer: someone with a lower salary than the move-up buyer (35 percent less) who is buying a cheaper place ($85,000 if the repeat buyer is getting $100,000 digs, for instance). This first-timer has 10 percent saved up to put down, which means mortgage insurance costs get tacked onto the monthly payment.
So many different ways to look at affordability. I personally like Pete from Highlandtown's definition, which he shared in a comment:
"I own a home and i dont want it to lose value. But i also want other people like myself to be able to buy a house. I bought my house[in 2003] back when a construction laborer like myself could afford to buy a house for $45,000. I think that is what makes Baltimore so great. That a guy like me can own his own house and be neighbors with people who have a diverse range of incomes."