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Home affordability drops

By Judy Martel · Bankrate.com
Thursday, August 15, 2013
Posted: 7 pm ET

Steadily rising prices signal happy days for home sellers recovering from the beaten-down values of the recession. But it's a different story for buyers. Coupled with higher mortgage rates, they're finding it more difficult to afford a home.

Home affordability nationwide slipped during the second quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

"Housing affordability has been hovering near historic highs for the past several years, largely due to exceptionally favorable mortgage rates and low prices during the recession," NAHB Chairman Rick Judson said in a release.

Prices rise, affordability falls

According to the index, 69.3 percent of new and existing homes sold during the second quarter were affordable to families earning the U.S. median income of $64,400, compared with 73.7 percent of such homes sold during the first quarter. The second-quarter drop also marks the first time the index has fallen below 70 percent since late 2008.

The second-quarter median price of all new and existing homes sold in the U.S. was $202,000, compared with the second-quarter median price of $185,000 a year ago.

Could it get worse?

David Crowe, NAHB chief economist, noted in a release that while rising mortgage rates and home prices are contributing to the drop in home affordability, there are other, looming factors that are a concern. Congressional discussions about reducing the mortgage interest tax deduction along with President Barack Obama's proposal to promote private investment in mortgages could make them more expensive for borrowers.

Keep up with your wealth and mortgages, and follow me on Twitter @JudyMartel.

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21 Comments
Ronald
August 23, 2013 at 11:25 am

Gilberto, you should buy now while interest rates are low. A 95,000 salary still makes it tough to be a home owner here in the great state of MD. A $400,000 mortgage @ 3-3/8 with built in escrow, PMI, and home owners will run you about 2400/monthly depending on the county you live in. If you're like me, 10% of your salary goes to retirement, then all the deductions. I'm sure you are probably netting around $2100/bi-weekly. Maryland is a tough state to get a head in. my recommendation is to move out of MD, then buy a house.

I miss seeing you around.

Ron

Dave
August 23, 2013 at 9:35 am

sat15...you are correct that there are problems with SS, but not in the example you call out. If someone contributes to SS throughout their employed life then they have the right to collect on it when they retire. It has nothing to do with if you think they need it or not. Your logic would have wealthier people paying for the poor folks retirement. I make a very good salary because I educated myself and worked very hard. I am tired of paying way more than my fair share just because I can. The big problem is that we are all forced to contribute to SS whether we want to or not. Nobody is owed a retirement, you have to work for it.

lowpay
August 23, 2013 at 8:47 am

Wow!!!! I guess someone like me who only makes $30,000 a year will never be able to have a piece of the American dream and own their own home.

Peter Talbot
August 23, 2013 at 8:00 am

Gilberto:

The choice of buying now or waiting relates entirely to relative current value of your money in hand. You are going to have to put down 30% of your mortgage or better to get most property now, though interest rates are attractive. You are balancing loss of earnings on that capital (invested in a diversified stock/bond fund or directly in the market) vs. the cost inflation will charge you in decreasing your cash on hand and inflating the property value. The stock/bond markets are oversold, so unless you are clairvoyant and very lucky, investments aren't going to do better than inflation. Inflation seems tame now but will skyrocket as Bernanke gets out of the Treasury buying scam.

If the property asking price is reasonable (not inflated by banks looking to sucker folks in over their heads: i.e., about 66% of current avg asking price for the neighborhood or lower), you are almost certainly better off buying now. The only other consideration is property taxes.

RD
August 23, 2013 at 7:08 am

The housing market will never improve without other economic improvements. Those that control the money put 3/4 of the nation in debt that will take many years to right itself. Government regulations drove business out, You don't bite the hand that feeds you. Wait about six years or two administrations if the current and future thieves are kept out of office, we've got a chance.

sat15
August 23, 2013 at 6:53 am

Gilberto you show us what is wrong with social security you don't need it to live on in retirement. Social Security was meant for people who didn't make the kind of money you are. Means testing needs to be implemented now.

BANKer
August 23, 2013 at 6:44 am

Raise the red banner share your wealth and pay more taxes or leave the us. Who needs 100s of millions to live

NOBAMA
August 23, 2013 at 4:50 am

Oh well Lee... some of us like Gilberto and I have it and some don't... lol Blame Obama.

Lee Daugherty
August 23, 2013 at 3:33 am

Gilberto,

you make 95k a year and your asking that kind of question.

gilberto
August 16, 2013 at 1:17 pm

My question is, what will be the best posibility for me, to try to purchase a property now that i am working or wait to retire and buy that property. This is the scenario .
My salary is $95,000.00 a year and a VA compensation of about $20,000.00 a year (95+20=115), or wait to retire with a pension of $40,000.00 a year, Social Security of about $24,000.00 a year and a VA compensation of $20,000.00(40+24+20=84)

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