Home Ownership out of Reach for Millions

[Matsubara]

http://news.yahoo.com/s/nm/20070611/us_nm/usa_housing_outlook_dc


Home ownership too costly for many Americans: study
By Patrick Rucker Mon Jun 11, 12:23 PM ET
WASHINGTON (Reuters) - Home ownership will remain out of reach for millions of Americans, despite slumping house prices, unless low-income wages grow faster, according to a national housing study released Monday.


A record 37.3 million households, or one in three, were paying a "moderate cost burden" of 30 percent of their income toward housing in 2005, according to The State of the Nation's Housing 2007. The study said the number of households with that cost burden had risen roughly 20 percent since 2001, when interest rate cuts helped spark a U.S. house price boom.

Improving housing affordability would require an increase in low-income family wages, looser home building regulations and more spending from the federal government, the report said.

However, those changes are unlikely in the short term and many Americans are likely to be priced out of the housing market for some time, said Nicolas Retsinas, an author of the study and director of the Joint Center for Housing Studies at Harvard University.

"Home prices have flattened recently but we don't see return to widespread affordability," he said.

The recent crisis in the subprime mortgage market means borrowers with damaged credit will be unable to buy a home, which will prolong the housing slump, Retsinas said.

Weak income growth among lower-income households and restrictive land-use regulations will also worsen affordability problems, the report said.

"The recent uptick in (mortgage) interest rates is going to exacerbate the affordability challenges," Retsinas said.

(See link for full article)





This fits in with what I pointed out in my post about housing prices in Japan. The use of homes as a speculative investment vehicle, rather than as a residence, is making housing unaffordable to more and more average folks, especially in "hot" markets.

But who can blame people for wanting to invest in homes, which seem stable, rather than American "industry", with its diminishing returns, despite the fact that it has been in a "sell everything off/lay everybody off/race to the bottom" posture for so many years?

[snappyturtle]

1. I know this may sound awful but..............

I realize the up tick of mortgage rates may discourage home ownership however, that discouragement may be a blessing in disguise! Why? I believe the low interest rates (I can remember paying over 16% in a corporate move) got people into shady, awful deals and they were taken advantage of...what we need is AFFORDABLE housing...for everyone! imho

[ngant17]

2. Housing was affordable in East. Europe under communism

When I visited E. Europe a few years ago (Prague and Budapest), I met some ordinary working-class families who benefited a lot from the socialist policies of past days. In fact, I talked to a family in Czech Republic, they own a very nice 2-story house
with a large garden, specifically due to the socialist policies
which were in effect back when CZ was socialist and not capitalist. They were given this subsidized house as a reward for getting married early and having a family. Today, with the pervasive influence of US capitalism everywhere you go in CZ, to try to acquire a similar kind of dwelling would be prohibitively expensive. It simply would not be possible today.

[snappyturtle]

3. Isn't that a shame?

[rinsd]

8. Too bad the Soviets didn't like the Czech communists.

[Matsubara]

4. I agree. The significance of interest rates is definitely overplayed.

Home mortgage interest is still deductible, right?

It's the prices that are out of whack. An average starter home in California is at least $450,000 now, and an average family income in CA is still around $60-70K.

Since when is a plain-jane house supposed to be seven times an annual income?


My dad bought our 3 BR house on a large lot in 1978 for about $65K. His income at the time was about $35K.

!!!!!????!!!!????!!!????



Why has the rise in housing prices been so completely disproportionate to the rise in average incomes?

The only thing I can think of is that trickle-down tax policies and corporate pay scales are enriching people at the top so much that they can buy up second and third homes as investments, driving the price up for the rest of us.

[tammywammy]

5. They were discussing taking away the mortage interest rate deduction

either last year or the year before. :(

I'm buying a 2 bedroom, 1 bath for a reasonable price. I'm lucky, because housing prices aren't crazy out here.

The housing market does need a good readjustment, in certain areas, which is happening now. The only bad thing is those people that bought a 3 bedroom for $450,000 are going to have a hard time eventually breaking even if prices go too far down. Too many people think of real estate as an investment to get rich quick, and things will work themselves out eventually.

It's a good time to buy in my area, and a horrible time to sell.

[Iris]

9. I don't think it sounds awful.

Especially when you add on your comment about affordable housing. I think home-ownership has been way over-rated as a "wealth-building" tool. Can't help but feel it's a way to keep the masses feeling content.

[Matsubara]

10. Problem is, rental housing is expensive now as well.

Even subsidized places that are called "affordable housing" rent for $950 in Miami, $1200 in San Francisco. That is not affordable to a low-wage worker!

[Iris]

11. Right - affordable housing should be part of the discussion, just like snappy turtle said.

And if housing is not affordable to the low-wage worker, than discussing affordable housing should address that.

[alarimer]

6. I think it's out of reach for me

At least for now. Which is a shame because apartment-living sucks in many ways. But as a single person (a status not likely to change soon or ever) with a moderate income (I work for the state) not likely to rise much in the future, I cannot save enough for a down payment. By the time I have saved enough (let's say 10k for the sake of argument) housing prices will be higher still. New houses here are going for at least 250K. There might be cheaper places but they are in terrible neighborhoods. Actually I could deal with living in marginal neighborhoods, just not the barrio.

I have heard of all those interest-only loans and other dangerous types of financing and they scare me. I am not willing to do that; I'd prefer to live in an apartment forever or buy something small (like a townhouse or condo) within my means rather than some McMansion simply because of cheap financing.

[snappyturtle]

7. You're smart, I think. Just stay put and wait a bit.

My daughter who works like a dog bought a condo 18 months ago and is about dying....she got a horrible deal but thought she could handle it and would't listen to me....well, today she says she's tired of living for her condo and is going to sell it!! Yeah! She's in a good area and things are still selling there with modest profit...I am so relieved BECAUSE in 5 years her interest rates which are horrible now, because she had too little down and is single and a woman, will escalate! I'm afraid she would lose it in the end.....stay put....things will work out eventually....if we're lucky, after the next election.