GeoffB

The Impending Mortgage Crisis: Part Three

There is another reason why house prices matter in relation to incomes: the relative impact HPA vs household income. If you own a house 2x your income that appreciates 10% its like a 20% bonus. If the house is 5x your income its a 50% bonus, time to upgrade to a bigger house or buy that SUV. The same happens on the way down. Many people could accept a 20% loss of income but 50% is too much.