Housing Affordability Proves Elusive

Thirty-year Fixed Mortgage rates remain at 6.0%. Rising treasury yields, however, would increase upward pressure on mortgage rates, suggesting the decline in housing prices is far from over.

I normally measure housing affordability by the ratio of the S&P Case-Shiller Composite Housing Index to Disposable Income per capita (before adjustment for inflation). There is a sharp fall to nearly 0.45%, the high from the late 1980s, but the index remains well above the 0.40% level normally needed to motivate home-buyers.

Bear in mind that the above does not even allow for the bite that higher fuel/gas prices have taken out of disposable incomes — nor the depressing effect they will have on house prices in outlying suburbs with longer commutes.

Disclosure: None

Comments

[User 201843:]

A generation lost to greed and bad bankers.

2008 May 31 09:51 AM

[romorris:]

There's nothing "lost" here. It's just a transfer of wealth from the foolish or the comfortable to the smart or lucky brave ones who found the courage to bail before the thing blew up (or in the case of realtors, brokers and bankers ... the crooked made $). Dumping my Pasadena, CA house in 2005 turned me into a millionaire (but a million dollars isn't what it used to be).

2008 May 31 12:09 PM

[bill d:]

We've been here before - happily for some of you, you weren't there or you don't wish to remember - wasn't fun then and it ain't now.

2008 Jun 01 03:36 PM

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2008 Jun 03 09:16 PM

[Matt75:]

Well, it all depends where you live. For instance, here in the Western New York area, there was no boom to speak of, so now there has been no bust....just slow and steady growth, which earned this area 3 of the top 10 rankings for best real estate markets(Buffalo, Rochester and Syracuse). Our housing prices are among the most affordable in the nation, with many nice houses available for under $125,000. I cannot for the life of me understand why people decide its better for them to move elsewhere so they can earn an extra $1000 per month, only to pay that much or more back out of their pocket due to the higher cost of living in a lot of places, which in some places borders on the absurd.

2008 Jun 04 08:42 PM