According to John Burns real estate consulting, home affordability
rates are at their highest levels since 1981.
Nationwide the median income household needs 27% of income to qualify
for a median-priced home. The same household is only paying 3.3 times their income
for the house. You can read the full story and check some interesting stats
here http://www.realestateconsulting.com/Newsletters.aspx?quicklaunch=true&newsletter=US/us200903
Ok I know what you’re thinking. This is good info for the country but what about the Reno Sparks area housing affordability.
First the median price in March 09 was hovering around $200,000. Median family household income for Reno/Sparks metro as of 07 was $55,689. These numbers put home prices at about 3.6 times income. Percentage of income (after tax) needed to qualify for the median price home with median income is about 32%. While these numbers are above national figures they are well within and actually on the low side of historical trends.
If you go back to 07 the median home price was around $315,000. Using the same median income levels as above, home prices were nearly 5.7 times income. Percentage of income to qualify was about 41% even at lower interest rates used to qualify. If you go back to 05 the numbers are even worse.
Bottom line, for our housing market to stabilize and recover, home price had to come down. Home prices need to be at levels that are affordable and sustainable for the long term. Just as important to affordability are the interest rates. The government as been pumping money in to the bond markets, to the tune of about 2 billion a day, which is keeping interest rates low. This is supposed to remain in effect throughout the rest of the year but will certainly not last for ever.
