While home prices are at all-time highs, it's still less expensive to buy a home or condo now than it was to buy in the 1980s, according to the New York Times.
A sharp fall in mortgage rates since the early 1980's, a decline in mortgage fees and a rise in incomes have more than made up for rising house prices in almost every place outside of New York, Washington, Miami and along the coast in California. These often-overlooked changes are a major reason that most economists do not expect a broad drop in prices in 2006, even though many once-booming markets on the coasts have started weakening.
The long-term decline in housing costs also helps explain why the homeownership rate remains near a record of almost 69 percent, up from 65 percent a decade ago.
Nationwide, a family earning the median income - the exact middle of all incomes - would have to spend 22 percent of its pretax pay this year on mortgage payments to buy the median-priced house, according to an analysis by Moody's Economy.com, a research company.
The share has increased since 1998, when it hit a low of 17 percent before house prices began rising sharply in many places. Although the overall level has reached its highest point since 1989, it remains well below the levels of the early 1980's, when it topped 30 percent.
Florida's Tampa Bay area is still one of the nation's lowest priced areas, when compared to other major metro areas. Few areas are more affordable in comparison to what is offered here, and it is a bargain when compared to other coastal real estate markets, such as New York and Los Angeles, among others.
Elsewhere, families tend to spend far less on housing. In Dallas, the share of income needed to buy a typical house has fallen to 13 percent this year, from 14 percent in 1995 and 31 percent in 1980. In Tampa, it has dropped to 21 percent, from 26 percent in 1980. Even in New England, where the soaring prices of the last decades have frustrated many young families, house values have still not reached the heights of the early 1980's, when calculated as a share of income.
Of course, affordability doesn't stagnate forever, and with the likelihood of Fed fund rates increasing at least twice this year, the housing market's affordability level will likely trend closer to where it was in the 1980s: much less affordable. Bubble dreamers, I mean analysts, are likely to wake up seeing that their dreams, I mean analysis, has popped. In 2006 housing affordability will decrease due to rate increases, even if home prices decrease, and they will in some parts of the nation, while other areas will see slower appreciation than in the last few years.
Article comments
1 - Bliffle
Interesting that Tampa is so financially attractive since it seems to be such a desirable place to live. I'll have to check it out again.
2 - Aaman
This is the most egregious advertisement you've ever done
3 - Temple Stark
This is the confusion that exists here Aaman.
4 - Mr. Real Estate
That's funny. I'm blond and I'm not confused.
I have a First Amendment right to editorialize on what the New York Times writes if I wish to do so. The data I used comes from the New York Times and Reuters, and it's all cited appropriately. This is not an ad; it fits in the guidelines and we've had this discussion on numerous other occassions. An ad would be if I posted:
Visit www.HomeInTampaBay.com to BUY NOW before RATES AND PRICES GO UP and DEVELOPERS SELL OUT!!!
Now that, my friends, is an ad. By all means, edit it out.
Happy 2006, everyone!
Btw, I was about to write my Beastie Boys review, but I'm holding off now due to this flack. No more nonsense in 2006.
This site makes money off me regardless of what I post, and what I post is within the guidelines, and I post on more topics than just real estate, and I also post reviews.
Cheers.
5 - Dave Nalle
That's hardly flack, Mr. R. Temple can get way crankier than he has here, and this is hardly the first time people have raised eyebrows at these posts. You ought to be used to it by now.
Dave
6 - Christopher Rose
Due to the argument above I felt compelled to read Mr Mudd's Opinion piece and, cynical old bastard as I have been called on more than one occasion, I could not in any way detect any kind of advertisement whatsoever.
Living in Europe, I don't have a huge amount of interest in US Real Estate prices so you can imagine how thrilled I was to read this well written opinion piece. Thanks for that Aaman.
Unless I'm missing something, I don't actually see why John should have to get used to people making apparently inaccurate slurs his way and I would ask him to not let this nonsense bother him and carry right on doing what he's doing.
7 - Aaman
It's an opinion.
Ah never mind. Have a nice day, and I do believe Tampa is a great place - was almost moving there earlier this year, work-wise.
8 - Bliffle
I used to visit my sister there and I loved Tampa. But now when I look at prices they seem very high - in fact all of Florida seems high. I have better places with secret savings.
9 - Mr. Real Estate
Tampa is certainly higher than it used to be, but it is still much lower than New York, Los Angeles or San Diego for comparable properties. It is, however, no longer a buyer's market due to high demand. It was a buyer's market in the early 1990s. Then the baby boomers began buying second homes here with the purpose of retiring here later. That is what is keeping the Tampa-Clearwater-St. Petersburg market hot. That, and the fact that we're not as overvalued as Naples, Ft. Lauderdale or Miami. Florida will have more than 300,000 people moving here every year for the next 25 years, according to a Florida Chamber of Commerce study, and many baby boomers are buying now so they will not have to spend more later.
Investors are more likely to buy in Texas and Arizona at this point, as those markets have not yet peaked. In fact, I am looking to buy investment property in Texas as I write this (it cashflows out with lower up-front investment, and I am seeking pure income property; investors who don't mind holding a while before a good NOI level is reached may still buy here; those who do mind will buy in buyer's markets), however, I am staying here in Tampa Bay's St. Petersburg area because it is a great place to live.
Cheers.
10 - pat
It depends on where you buy. In the more desirable areas of Tampa Bay, 225k won't get you very much. It is still WAY more affordable to rent in those areas than to buy. Furthermore, the decent homes that fall in the 225k range are in far-flung suburbs that have been absolutely ravaged by foreclosures. You have to add in the costs and time involved with long commutes that are associated with these locations.