Here's an updated affordability chart for the Washington Metropolitan Statistical Area. The NAHB/Wells Fargo Housing Opportunity Index (HOI) has data going back to 1991.
HOI is a measure of the percentage of homes sold in a given area that are affordable to families earning that area's median income.
Thursday, March 17, 2011
Housing Affordability Update
Posted by Harriet at 6:46 PM
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14 comments:
Game, set, match.
Wow. That is really surprising. Seems to me if the economy gets back on track we're set for another 7 year pattern climb up. (Assuming real estate follows the old rule of thumb of 7 year cycles...)
My $0.02
mytwocents-
If the economy gets back on track interest rates will likely increase bringing down affordability, which would likely mute gains. If the economy gets back on track we could see a cycle where affordability falls for seven years, but that doesn't necessarily mean large price gains. I don't think interest rates will cause housing to fall, but the 80s showed that when interest rates go up nominal prices will grow, but real prices ma fall.
I actually am not that bullish on interest rates going up, but that's because I think the economy will continue to muddle along.
Housebuyer,
Yeah I don't think we'll see the types of gains we saw 2002-2005 again but the pattern is matching the mid to late 90's. So the economy was coming out of a slump in '94, wages and employment prospects grew steadily through the late 90's and home prices finally started catching up in 2000-2001.
I think without the easy credit boom, and attempt to kick start the economy with such low rates, that 2003 would have been a local peak of the 7 year cycle and housing would have bounced around for a while there with a possible small pullback.
As it was, easy lending, Internet firms, and loose money extended that cycle another 3 years before the bottom really fell out.
My $0.02
mytwocents-
That sounds very reasonable. I thought you were proposing this cycle would be like the most recent one. Instead you were saying it would be more like a standard cycle, and that sounds very feasable
I wonder if the affordability would be lower for specifically northern Virginia, or certain segments of it, or if the average income is evenly distributed to match the higher priced areas?
How are we supposed to take a report by NAHB and Wells Fargo seriously?
In my mind the most important number is the amount the federal government will continue to spend in this area.
Katie-
No the numbers are not evenly spread out. Below is a list of the highest median incomes from 2006-2008. (This was the first list I saw although it is a little dated) PWC, Fairfax, and Loudoun all have incomes comparable or higher than Arlington, but they all have lower house prices.
1 Prince William $110,643
2 Fairfax County $106,785
3 Howard County, $101,710
4 Somerset County $103,227
5 Hunterdon County $100,947
6 City of Fairfax $98,133
7 Morris County $97,565
8 Douglas County $97,480
9 Arlington County $96,390
10 Montgomery County $93,999
11 Nassau County $93,579
12 Stafford County $89,536
13 Calvert County $89,049
14 Loudoun County $88,675
Okay, so incomes went up 11% since Q1 2002 and prices went from 200 to 277, and interest rates for a 30 year fixed went from 6% to 5%, but affordability is the same?
I call BS.
I sense a "vast right-wing conspiracy"
Scott-
According to the Fannie rates page rates interest rates were ~7% on average during Q1 2002 and between 4.25%-4.5% in Q4 2010. I quickly checked and it looks like this drop in rates kept affordability pretty flat. Obviously you are much better off buying in 2002, because it is better to pay higher interest rates and lower prices than vice versa (since you can refinance), but if all you are looking at is the mortgage during both time periods than affordability is pretty comparable
get out to WVA or loudon it is affordable
until gas prices hit $4.50
pat,
Is it appropriate to rely on these affordability numbers for only 17 out of the last 20yrs? I imagine PWC, WVA, etc. were proportionately lower over the past 20 yrs. And there have been dynamic "real" changes to Arl during that time period.
It's hard to give credibility to arguments/statements that seem totally arbitrary. Housebuyer spent about a minute pulling up 3 comps for your current rental - all dismissed by you. You are still trying to get an "orange".
pat,
I am still trying to figure out your statements regarding "vacancy" in Arlington. Could you provide a link to your source again? Is this rental or vacant housing in general. I can't imagine that the rental vacancy numbers for Arlington are almost double that of Fairfax.
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