Has Home Affordability Peaked?
We looked at the issue of home affordability as measured by the National Association of Realtors in July 2009. As always, the indices for both composite fixed/adjustable mortgages and fixed-rate mortgages (red columns, left-and right-hand charts, respectively) are a lagging function of existing home sales (blue line, both charts). The NAR has not published a separate affordability index for adjustable-rate mortgages since November 2008; quelle dommage.
If the observed eleven-month lead time holds, we should see a decline in affordable during the window when the first-time homebuyer’s tax and the Federal Reserve’s expire. If the market is left to its own devices, affordability will recover not when financing costs fall or when subsidies intended for the buyer but in fact captured by the seller increase but rather when sale prices fall.
This will have the effect of maintaining high levels of mortgagor delinquency. As mortgage financing has remained a public affair via the open-ended backstopping of Fannie Mae and Freddie Mac and via the mortgage-backed securities on the Federal Reserve’s balance sheet, the housing overhang will remain a drag on economic expansion for the foreseeable future.
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March 24th, 2010 at 12:19 pm
[...] Has home affordability peaked? (Big Picture) [...]
March 24th, 2010 at 12:29 pm
Meanwhile. North of the border:
House prices to hit record: Scotiabank
Most regions will remain sellers’ markets until spring, but an increase in listings and construction should create a more balanced market, bank says
http://www.theglobeandmail.com/report-on-business/economy/house-prices-to-hit-record-scotiabank/article1509303/
Our Goldman alumni central banker is doing everything he can to catch Canada up and hook it to the crazy train
March 24th, 2010 at 1:05 pm
“[Free? Regulated?] market… affordability will recover … when sale prices fall” to levels that match the buyer’s income and access to reasonable amounts of credit?
http://www.bls.gov/oco/oco2003.htm
Ok so, BLS Occupational Outlook, largest job growth
Home health aides
50 % change
460.9 thousand jobs
$20,460 /year
Short-term on-the-job training
Personal and home care aides
46% change
375.8 thousand jobs
$19,180
Short-term on-the-job training
Family income $39640,
budget $1090 for mortgage (33% of income)
30 yr 5%: $203k;
30 yr 6%: $181k
30yr 7%: $164k
$2200 for everything else, taxes, insurance, food, energy, etc.
An economic drag indeed…
March 24th, 2010 at 3:51 pm
Home prices will have to keep coming down. What we saw over the summer and fall was the clear effect of government trying to prop up the prices. Wish I’d sold, but I’m not the only one in the house making the decision. That might have been the last stop before a housing free-fall. But, it is still a regional market, even a street-by-street market, and some properties just won’t be as effected as others.
Wages and standards of living are coming down in this country. They were growing at an unsustainable pace, and now we have to share with millions of immigrants who have come here, understandably, for a better life. More mouths to feed+less jobs that pay a living wage= Lower wages for all, and lower standards of living.
Home prices have a long, long way to fall yet.
March 25th, 2010 at 12:51 pm
[...] From The Big Picture – Has home affordability peaked? [...]