double beta

How Much Further Will Housing Fall?

The arguement is soft in relying on the historical conservative 28% 'front end' debt-to-income used for underwriting purposes. This ratio has ratcheted upwards into the 30+% range. If it this benchmark ratio was advanced to a more appropraite 32-35%, it would indicate that housing is affordable.

However, the bigger problem I have with this article is that the author is assuming a 0% downpayment. If I were going to assume a tight underwriting DTI, I would also assume a requred 10%- 20% equity contribution. Once again, factor a 15% equity contribution with a 32% front end ratio, and it would appear that housing is affordable in relative terms.