New Home affordability drops to 43.6%

[F.Gordon]

We've turned around another corner.:-(
You should note that this affordability ratio is based on the assumption that a new home buyer is putting 20% down on the purchase of a new home. That translates to a median down payment of approximately $42,000. Also, if I have time in the next couple of weeks I'll try to crunch the numbers to come up with a ratio removing the southern region...which is really distorting the national numbers.

New home affordability decreased in June, falling to 43.6% for fixed-rate mortgages, while adjustable rate mortgage affordability decreased to 52.0%. Affordability rates saw a rise due to higher median prices and despite an increase in sales pace in the lower-priced South region of the nation.

The June figure illustrates that about 44% of households across the nation could afford to purchase a new home at the median price of $209,900 when using a 20% down payment and a 30-year fixed rate mortgage with June's average rate of 6.29%. An income of $54,335 would be needed to qualify for the purchase of the median priced new home using a fixed rate mortgage, while an income of $45,259 would be needed to qualify using a 1-year adjustable rate mortgage at an average rate of 4.10%.

We expect home building activity to continue to put in a strong performance in the short term. As we move farther into 2004, mortgage rates will continue to rise, but should remain within the comfort level of most homebuyers through much of the year, thereby helping support the pace of new home sales. The low mortgage rates are most advantageous to entry level and first move-up buyers, who still exhibit strong demand, but typically have less equity than other homeowners for purchasing a home. As rates go up, it is likely we will see a decline in first-time homeowner purchases.

http://www.meyersgroup.com/analysisobjects/affordabilitynew.asp?ProductCategory=NHMR

[demnan]

1. Not much in my area is $209K or less

unless it's a one or two bedroom condo. But outer D.C. is a terrible area for housing now - inner D.C. - forgetaboutit.

[fairfaxvadem]

3. Exactly right Demnan.

I was just thinking that I bought my house comfortably 5 years ago and now, since my income hasn't even come close to increasing at the pace of home values here in the DC area (ha! I wish it had!), I could not afford to buy my own home today, and that is scary.

And my townhouse is nothing to brag about either, but I do know just how lucky I was to buy when I did.

So, for all of those folks who are in my income bracket right now, there is nothing out there for them except, as you say, the condos outside the Beltway.

I can't say how many folks I know who bought further out and are now total slaves to their house payment, car and job. Sad.

[TheFarseer]

2. Holy obscure stats, Batman!

sorry to pick on you but I get sick of obscure stats being used by both sides

[F.Gordon]

5. Obscure?

I prefer....oblique. Which is why I mentioned that the southern region is throwing the national numbers off. In many other regions $209,000 won't buy you a cardboard box.

I'm not a huge fan of "statistics" myself...even this site is pretty biased towards the housing industry....but, I think it's important to at least consider the stats and some of the unmentioned cause/effects that are going on.

For me, making a least a half-assed attempt at understanding some of what is going on it fairly important.

Or, you can just ignore all statistics, like yourself. There are definitely benefits to this type of bliss.

[Trajan]

7. Who the fuck cares ? ...

Puke in a fucking bucket .... or on your lap, if you prefer ....

[section321]

4. Nothing in my area is under $400k, unless you live in South Central...

I live in Los Angeles and it sucks. (Real Estate wise)

[NJCher]

6. this has a very real effect on quality of life

I have a friend who just took a new job (out of necessity--her current company is laying off every quarter) at 90k. She cannot find anything in her price range in communities surrounding the new job. In fact, there is only one house for sale in the entire town where the new employer is located. That house is $450k.

Consequently, she will be traveling at least one hour each way, probably more. That makes for a 11-hour work day. How is there any quality of life with a schedule like that?


Cher

[sjr5740]

8. There are two housing markets in this country

One is tightly associated with Urban centers (I have lived in NY, Bay Area and Boston) where housing is through the roof and the lack of affordability makes people live farther and farther from work just to be able to afford to live leading to sprawl and clogged highways

In rural areas housing prices barely move and there is plenty of land so builders just keep throwing up crap boxes which look nice for a year or so and will probably not last 30.