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.
The Obama administration is laying out three broad options for overhauling the mortgage lending system, but will let Congress make the final decision…
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Home prices dropped 2.6% nationwide during the last three months of 2010, pushing more borrowers underwater, according to a quarterly real estate market survey from Zillow.com.
Now 27% of homeowners with mortgages owe more than their homes are worth. That’s up from 23.2% a quarter earlier.
That will surely lead to higher foreclosure rates soon. That’s because being underwater is second only to unaffordable payments in leading to foreclosure, according to Zillow’s chief economist, Stan Humphries.
Additionally, the report found that more than one-third of all homes were sold at a loss in December. That trend has been on a steady uptick for the past six months, as homeowners try to find ways around foreclosure or out from under their homes.
The so-called “robo-signing” events of the fall also forced the number of underwater mortgages higher.
When banks’ foreclosure paperwork came under scrutiny, many halted all repossessions until they could straighten things out. With foreclosures no longer being cleaned out of the system, more homes stayed underwater rather than moving on to foreclosure.
The moratoriums have been only temporary, however, and the defaults that had been stopped up in the foreclosure pipeline could come out in a gush over the next few months.
And any bump in the number of foreclosures adds to the likelihood that more homes will be dumped onto an already bloated market. That would just further depress home prices, continuing the vicious cycle that has plagued the industry for several years.
The drop in home values caused by the mortgage crisis has resulted in at least one positive outcome: Prices have fallen so far and so fast that home affordability is back to pre-housing boom levels, according to a new report.
After reaching a peak in late 2005, the ratio of home prices to annual income fell to its lowest levels in 35 years last September, according to data compiled by Moody’s Analytics, which tracked median home prices and annual incomes in 74 markets.
By that measure, housing affordability at the end of September had returned to or surpassed the average reached between 1989-2003 in 47 of those markets, The Wall Street Journal reported, noting that most economists believe the housing boom took off in 2003.
“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.”
Though homes have become affordable, an increasing number of people who bought as the market was rising toward its peak are finding their homes are now worth less than the amount owed on them, also known as being “underwater.”
More than a quarter of households with a mortgage were underwater at the end of December, up from 23% in the third quarter, the Journal reported, citing data compiled by real estate website Zillow.com. The increase was attributable to a further decline in home prices and the temporary cessation of foreclosures by banks, which had halted the practice to correct errors in document handling.