Housing Affordabilty Reaches New Record High
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Friday, April 01, 2011
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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6 Comments:
then why can so few people get loans?
getting a mortgage is very, very difficult right now.
ask any mortgage originator or realtor. financing risk is the biggest part of any application right now.
look at the MBA applications index and compare it to fundings.
fantastic drink specials in a VIP room they won't let you into don't do you much good.
Right, the house is affordable but you cannot get the loan.
Inflation?
Sure, when housing is cheaper than ever?
Why do you keep publishing that 5X income is affordable? Why do you keep promoting leverage?
Why is the following true?
• Stable housing market. Across the nation, nearly 1 in 4 homeowners with a mortgage are underwater. In North Dakota, just 1 in 14 have negative equity, the fourth lowest negative-equity ratio among all the states. The state also has the third-lowest home foreclosure rate. Affordable homes are a big part of the story here; let's just say you don't need to overstretch to own. According to Zillow, the median home price in North Dakota is below $150,000. That's less than three times the state's median household income. By comparison, even after sharp post-bubble price declines, the median priced home in California is still about five times median household income.
Using the recent Census Bureau data on home occupancy and vacancies and relating it to 2000's numbers it turns out that even at the low new starts rates we have it'll take about four years to clear the inventory.
Unless people start viewing these houses as inflation hedges (by the way, where are all the stories about those brilliant vulture buyers?) House prices aren't going anywhere.
Even lower prices won't 'clear' the market as there isn't enough people to inhabit these homes. Go to sleeep on this for another three years at least.
And because housing starts will stay in the tank, lop about 0.7% off of your GDP growth forecasts.
A household with the median family income of $61,566 has 192.3% of the qualifying income needed to purchase the median priced single family home of $157,000, ASSUMING a 20% down payment and a 30-year mortgage at 4.91%.
That is one huge assumption. The US housing market was based on no money down, undocumented incomes, and variable rate mortgages. Given the debt loads of many families they don't have the 20% down payment and are unlikely to qualify for mortgages unless government looks the other way and nudges banks into being reckless again.
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