Housing Affordability Falls: Is Real Estate Market in Recovery? 22 comments
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The National Association of Realtors reported that the Housing Affordability Index ((HAI)) fell to 159.2 in June from 169.8 in May, due to a 4% increase in the median price for existing single-family homes ($174,600 to $181,600) and an increase in mortgage rates from 4.95% in May to 5.16% in June. Compared to the peak housing affordability of 178.8 in April, the June HAI is almost 20 points lower, but is still 35 points above the average of 124.3 (since 1989).
As the housing market recovers, we can expect gradually rising home prices, which will gradually lower housing affordability. In fact, the falling HAI over the last two months is sign of real estate market recovery.
Bottom Line: It's still the case that there has probably never been a better time to buy a house than right now, due to the combination of low home prices and low mortgage rates. And throw in a $8,000 tax credit for first-time home buyers, and it makes today's real estate market look even better.
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I would would say "probably" except for one very real "possibility".
The possibility that things are going to get much worse in the real estate industry in the near future. With all the data on Alt As and other exotic mortgages that are going to reset within the next 18 months, and the record number of foreclosures that are currently happening, I am at a loss as to how this writer formulates his thesis.
WOW, thanks for the financial and life advice Punchy.
Any new flavors?
"How much worse can it get? 2011"
On Jul 31 01:46 PM John Galt wrote:
> The National Association for Realators say that NOW is the best time
> to buy a house.
>
> Go figure. Would you also care to share their past predictions? I
> seem to remember ...
>
> "Don't get priced out of the market 2006"
> "Buy the dip, housing is cheap, there are deals 2007",
> "Bottom in 2008"
> and now "affordability is at a high for the last 20 years 2009"<br/>
>
> So are the Realators really looking out for you or are they trying
> to earn a commission?
>
"How much worse can it get? 2011"
On Jul 31 01:46 PM John Galt wrote:
> The National Association for Realators say that NOW is the best time
> to buy a house.
>
> Go figure. Would you also care to share their past predictions? I
> seem to remember ...
>
> "Don't get priced out of the market 2006"
> "Buy the dip, housing is cheap, there are deals 2007",
> "Bottom in 2008"
> and now "affordability is at a high for the last 20 years 2009"<br/>
>
> So are the Realators really looking out for you or are they trying
> to earn a commission?
>
Yes median home prices and median income have converged - suggesting affordability has improved - per NAR model. But their model is only half the story for housing recovery - it ignores demand/supply and buyer sentiment. Also median home prices today reflect the larger volumes of cheaper properties - foreclosures/subprime- that brings down the median home price. Median income also gets distorted similarly be measuring income of people with income (lot of people without jobs have no income).
Inventories continue to rise due to foreclosures and lot more to come. Demand diminishes with job losses and lack of availability of easy credit. So overall affordability has gone down, and no stability or bottom in the housing market.
Relying upon real estate agents for investment or financial advice is a lot like going to a crack dealer for legal advice.
Affordability is at an all time high, interest rates are historically very low.
The remainder is for the buyer and seller to figure out.
So, for many markets this is pretty much irrelevant. The median price (sold, not asking) in my area is perhaps $350K, and I doubt many buyers who could take advantage of the credit could afford the house.
To the question in your title, the answer is: not yet, but the free-fall is slowing.
No credit crunch: seekingalpha.com/artic...
US Economy doing quite well: seekingalpha.com/artic...
We're still a long way from a banking crisis: seekingalpha.com/artic...
A little perspective, according to the world of Dr. Mark Perry:
First, there's no recession:
mjperry.blogspot.com/2...
Second, the monetary base was growing at an acceptable rate:
mjperry.blogspot.com/2...
Third, the big one, there is no credit crisis:
mjperry.blogspot.com/2...
mjperry.blogspot.com/2...
mjperry.blogspot.com/2...
Especially because, "banks are lending at record levels":
mjperry.blogspot.com/2...
In the case of the article above, however, there is very little doubt that every respondent thought the article hopelessly compromised, especially given the authorities cited. Even though the Mr. Perry might possess the intellectual capacity to compose a blog we all might benefit from reading, the current thesis as presented in the article will most likely lead many readers less likely to read his post in the future. In fact some may never read his post again. This is a fact that is not lost on many of the reviewers.
Perhaps Seeking Alpha could add another criteria to this column vote. On a scale of one to ten, with one being the lowest, how likely is that you, the reader, will return to this writer's blog for more insight based on the quality of this writer's research and the conclusions he or she draws from it.
Most of the people who post here have demonstrated fairly strong critical faculties, and many have exceptional experience in their particular fields of business and professional practice. A better rating system would be to reward the writer who truly provides alpha. It is hard to imagine why this website would want to encourage writers who only subtract value.
PS Hat Tip to W. E. Heasley, who completely captured how easy it is to state the obvious.
Amazing to think that the AP can call tops and/or bottoms.
Does anyone remember the AP telling everyone at 14k that the DOW had topped?
Me neither
www.foxnews.com/story/...
On Jul 31 04:47 PM Mad Hedge Fund Trader wrote:
> Not when wages are falling as relentlessly as they are. A handful
> of positive data on residential real estate, and all of a sudden
> everyone is jubilant that the crisis is over. June new home sales
> popped by 11%, while the S&P Case Shiller Price Index flaunted
> two back to back monthly gains. Never mind that these are the same
> people that have been calling a bottom almost every day for the past
> two years, and who themselves have gone broke in the process. It’s
> a basic law of economics that when you drop the price, the volume
> goes up. We have not paid enough penance yet. We have not atoned
> for a generation of under saving and overconsumption. The harsh reality
> is that the torrent of selling is being briefly staunched by a dwindling
> group of first time buyers once priced out of the market, who saved
> their cash, and stayed away from the stock market, and are now buying
> two thirds off the top. Take away the fantastically generous government
> subsidies that expire in a few months, throw in the next wave of
> Option ARM reset induced foreclosures, and this market folds like
> a wet taco shell. I’m waiting to buy at 20th century prices, and
> make that a home with an indoor swimming pool and basketball court.
On Aug 01 10:50 PM User241885/(FAMCO) wrote:
> Seeking Alpha needs to change its thumbs up/ thumbs down voting criteria,
> which asks readers to decide whether this is a "good" article or
> a "bad" article. It is at very least confusing because someone can
> write a good article, but a reader who disagrees can give it a thumbs
> down, and vice versa.
>
> In the case of the article above, however, there is very little doubt
> that every respondent thought the article hopelessly compromised,
> especially given the authorities cited. Even though the Mr. Perry
> might possess the intellectual capacity to compose a blog we all
> might benefit from reading, the current thesis as presented in the
> article will most likely lead many readers less likely to read his
> post in the future. In fact some may never read his post again. This
> is a fact that is not lost on many of the reviewers.
>
> Perhaps Seeking Alpha could add another criteria to this column vote.
> On a scale of one to ten, with one being the lowest, how likely is
> that you, the reader, will return to this writer's blog for more
> insight based on the quality of this writer's research and the conclusions
> he or she draws from it.
>
> Most of the people who post here have demonstrated fairly strong
> critical faculties, and many have exceptional experience in their
> particular fields of business and professional practice. A better
> rating system would be to reward the writer who truly provides alpha.
> It is hard to imagine why this website would want to encourage writers
> who only subtract value.
>
> PS Hat Tip to W. E. Heasley, who completely captured how easy it
> is to state the obvious.
In that regard, in my opinion, Mr. Perrry serves his purpose well.
On Aug 02 12:30 AM j-dub wrote:
> Awe,
On Aug 02 12:33 AM j-dub wrote:
> I don't mind a bit of comic relief to counteract the seriousness
> and sometime drudgery of economic opinions.forcasters.
> In that regard, in my opinion, Mr. Perrry serves his purpose well.
>
Keep trying Perry but its a waste of time trying to make a loser into a winner.
On Aug 02 09:04 AM CLH wrote:
> Wow Perry you really know how to collect the losers. As soon a houses
> are sky high these commenters will be ready to buy. Im sure none
> of them bought stocks in March 2009. They are still hiding under
> the bed.
>
> Keep trying Perry but its a waste of time trying to make a loser
> into a winner.