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Economists at Moody’s Analytics say homes in many parts of the country are at their most affordable levels since before the housing boom took off in 2003, the Wall Street Journal reports.
According to the Journal, housing affordability – comparing home prices to household incomes – has returned to its average levels from 1989 to 2003 in 47 of the major markets included in the report. On a national level, the ratio of median home prices of household incomes has dropped to 1.6 from a high-water mark of 2.3 in 2005.
“Based on incomes, this is as affordable as it gets,” Mark Zandi, chief economist at Moody’s Analytics, told the WSJ. “If you can get a loan, these are pretty good times to buy.”
The paper added that many economists think prices may continue to fall a bit further because of weak demand.
However, qualifying for a mortgage to take advantage of those conditions may not be simple. A survey from Fannie Mae late last year found that more than half of Americans found that getting a mortgage would be difficult.
A sign that an economic recovery is slowly getting underway is evident by figures from one of the most deeply impacted industries during the recession — the construction industry.
November marked a third consecutive month with construction spending up. Development of new homes, along with an increase in government funding for federal construction projects, is giving the badly beaten construction industry a boost. The New Year is starting with some optimism, following a very bleak summer.
The Commerce Department says construction spending increased 0.4 percent in November to an annual rate of 810 billion dollars. That’s the highest level since last June. Construction, especially of new homes, suffered greatly due to the recession. Building activity is now just 2.3 percent higher than in August, when it dropped to its lowest level in a decade.
With signs of an economic turnaround taking shape, home buyers who are eligible can take advantage of very attractive mortgage rates, with a bit more confidence that the nation’s economy will improve going forward.
Analysts are still cautious, as government spending is likely to drop in the second half of 2011. Government projects may wind down as the new Congress looks to cut back due to tremendous budget deficits.
Some economists think homebuilding activity has finally hit bottom, and a sustained recovery is still some time off into the future. A big challenge for a sustainable recovery involves the banks. Builders continue to have difficulties obtaining financing for projects as banks have tightened credit standards in response to high default rates.