The median price of a home in the Richmond area is $178,836, according to the Office of Federal Housing Enterprise Oversight.Americans are becoming increasingly house poor, Census data show.Homeowners in every state except Alaska spent more of their incomes on housing costs last year than at the start of the decade, according to data released yesterday by the Census Bureau. Alaskans spent the same.
Nationwide, homeowners spent nearly 21 percent of their incomes on housing costs last year, up from just under 19 percent in 1999...
...Nearly 45 percent of all households here -- with a median income of $55,741 -- can afford a median-priced home of $178,836 in the Richmond area.
That is down from 55 percent of households that could afford a median priced house in the first quarter of 2004, when the cost was $130,345.
"Until incomes catch up, the housing market is going to remain flat," Zandi said.
America's home-ownership rate is at a near-record 68.7 percent. But some housing advocates warn that declining affordability will make it difficult for low-income owners to keep their homes.
For example, the government says housing costs are excessive if they top 30 percent of household income. Nationally, 34.5 percent of homeowners with a mortgage had housing costs that topped that benchmark in 2005, an increase from 26.7 percent in 1999.
So, if I understand this correctly, just under half of all households, which includes both those that own homes anyway, and those that rent, could afford the current price of the median home on the market. Two points.
First, most of the 68% or so who already own a home don't need to worry that prices are rising quickly. This does not make them "house poor" in the least. They have an asset of floating value and a liability of fixed cost. I'll admit my economics courses were many years ago, but shouldn't the term "house poor" be limited to those who owe more to the bank than the house is worth on the market? This spike in house prices certainly isn't making these people poor, though it might lead them into making poor decisions about what to do with their (paper) equity.
Second, if you want a real measure of house inaffordability, shouldn't you use only the incomes of renters to calculate this value? So, look at that 32% who rent now, and tell me what fraction of them could afford to buy a house, but choose not to. If that was what they meant above, then I really have no sympathy. If 45% of renters could afford to buy a median priced house, but choose not to, who am I to argue with their judgment? For the other 55%, maybe this indicates that if they want a house they need to look at those below the median price. After all, in a perfect market economy, wouldn't 50% of all households be able to afford the median price? We're not that far off.
2 comments:
I'm not at all sure it would be cheaper, but that's kind of the point, isn't it? Renters look at their situations and make a decision about what to do; continue renting, or buy. They do "what feels best."
The problem is more in areas where they are using no-down or even negative amortization loans to lure in first time buyers. When their balloon payments come due, or their ARM rates go up, they are gonna be screwed.
In the meantime, why are costs so incredibly high in some areas? It's got to be "because I can charge that much. Take a look at these houses, and tell me what you think they'd cost around Pasadena. Listen to what Lou (the guy driving) says they cost in Houston.
Also, when I was in planning school, the price of a house was double the annual salary (so it came out with a normal interest of about 30-35% of income) . . . so yeah, in Richmond, even people are house poor. That's the problem - too much money per house. Remember what we were paying on the Colorado house??? Hmm???? Compared to the income??? It was pretty danged tight.
Winnie
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