Home affordability returned to pre-bubble levels in a growing number of U.S. markets over the past year as price declines laid the groundwork for a housing recovery, according to an article today by Nick Timiraos at wsj.com.
"During the boom, lax lending and speculation pushed house-price inflation far beyond the modest rise in household income. Nationally, the ratio of home prices to annual household income reached a peak of 2.3 in late 2005. But by last September, it had fallen to 1.6, matching the lowest level in the 35 years the data have been collected and well below the historical average of 1.9 between 1989 and 2003," the article said, adding that 'Based on incomes, this is as affordable as it gets,' said Mark Zandi, chief economist at Moody's Analytics. 'If you can get a loan, these are pretty good times to buy.'"
Home values in the United States posted their largest quarterly decline since the first quarter of 2009, falling 2.6 percent as the temporary stimulus of the home buyer tax credits wore off, according to Zillow.com, the article continued, "but the bad news is that those price declines are leaving more borrowers underwater, or in homes worth less than the amount owed."
Nearly 27% of homeowners with a mortgage were underwater at the end of the fourth quarter, up from 23.2% in the previous quarter, according to data to be published today by Zillow.com, a real-estate website. "The increase resulted from a 2.6% decline in home values during the quarter and the fact that fewer homes went through foreclosure after banks halted foreclosures to correct document-handling errors," the article said, adding that "many economists and housing analysts expect an additional decline of 5% to 10% before prices reach bottom later this year or early next year. Housing demand remains weak because buyers are skittish about the economy and lending standards are tight."
"Markets that now appear to be undervalued include Detroit, Las Vegas, Atlanta and Phoenix. Even in such markets, high rates of foreclosure and underwater borrowers should keep downward pressure on prices. 'They're undervalued, but they're going to get even more undervalued,' said Mr. Zandi," the article said.
Home prices still remain overvalued in several markets, including Seattle, Charlotte, New York and Portland, Oregon, the article said, adding that "based on rents, 'it's still not a slam dunk to buy' in those markets, said Mr. Zandi. He said markets appeared most overvalued in the Pacific Northwest, which was among the last regions to enter the housing downturn. Historical measures also showed prices were still high along the Northeast corridor from Baltimore to Boston."
"During the boom, lax lending and speculation pushed house-price inflation far beyond the modest rise in household income. Nationally, the ratio of home prices to annual household income reached a peak of 2.3 in late 2005. But by last September, it had fallen to 1.6, matching the lowest level in the 35 years the data have been collected and well below the historical average of 1.9 between 1989 and 2003," the article said, adding that 'Based on incomes, this is as affordable as it gets,' said Mark Zandi, chief economist at Moody's Analytics. 'If you can get a loan, these are pretty good times to buy.'"
Home values in the United States posted their largest quarterly decline since the first quarter of 2009, falling 2.6 percent as the temporary stimulus of the home buyer tax credits wore off, according to Zillow.com, the article continued, "but the bad news is that those price declines are leaving more borrowers underwater, or in homes worth less than the amount owed."
Nearly 27% of homeowners with a mortgage were underwater at the end of the fourth quarter, up from 23.2% in the previous quarter, according to data to be published today by Zillow.com, a real-estate website. "The increase resulted from a 2.6% decline in home values during the quarter and the fact that fewer homes went through foreclosure after banks halted foreclosures to correct document-handling errors," the article said, adding that "many economists and housing analysts expect an additional decline of 5% to 10% before prices reach bottom later this year or early next year. Housing demand remains weak because buyers are skittish about the economy and lending standards are tight."
"Markets that now appear to be undervalued include Detroit, Las Vegas, Atlanta and Phoenix. Even in such markets, high rates of foreclosure and underwater borrowers should keep downward pressure on prices. 'They're undervalued, but they're going to get even more undervalued,' said Mr. Zandi," the article said.
Home prices still remain overvalued in several markets, including Seattle, Charlotte, New York and Portland, Oregon, the article said, adding that "based on rents, 'it's still not a slam dunk to buy' in those markets, said Mr. Zandi. He said markets appeared most overvalued in the Pacific Northwest, which was among the last regions to enter the housing downturn. Historical measures also showed prices were still high along the Northeast corridor from Baltimore to Boston."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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