Great News on Housing Cost/Income Affordability

CNBC reported this morning on some interesting numbers I wanted to pass along on improvements in housing affordability. We know that house prices have continued on average to decline year over year, but numbers from a report by John Burns Real Estate Consulting brings those numbers into perspective by factoring in overall buying power.

John Burns RE makes some very strong arguments for getting off the fence in Housing Affordability Reaches Its Best Levels in Several Generations! You'll find much of his supporting research data in the article and it could prove a useful sales tool.

The cost of homeownership on a national basis has "fallen 43 percent from the peak in this cycle, with more than half of that due to the decline in home prices and the rest due to lower mortgage rates and increases in income."

How much of your income are you going to spend each month to pay for the house? (Assume that you put 20 percent down on a conforming loan).


From Realty Check:

In Oakland, CA you will pay 28 percent of your income. That’s down from 84 percent at the peak of the market. I realize, that’s one of the most drastic change scenarios.

But how about here in Washington DC? You are now going to pay 25 percent of your income on your home. That’s down from 53 percent at the end of 2005.

In Nashville you will now pay 22 percent of your income, down from 31 percent in 2007, and in Philadelphia you will now pay 28 percent of your income, down from 36 percent.

Now for my fave: in Los Angeles you will now pay 45 percent of your income on a home. That’s a lot right. Well at the peak of the market, in August 2007, you were paying 102 percent, yup, more than your income, on your home.

So for those of you sitting out there on the fence, waiting for prices to be ever-so-favorable, open your eyes! Prices may fall more, but you’re already in a pretty good place. Historically, a 31 percent debt-to-income ratio on your mortgage was considered fiscally healthy.