Good News on Housing

by Art Woolf

For the last two decades, I've been publishing my Vermont Housing Affordability Index in The Vermont Economy Newsletter.   And affordability has been improving for the past few years, as I noted here.   My measure of affordability, and my view that housing affordability has improved recently, has been challenged by several housing advocates, and by Doug Hoffer, who is now the Democratic candidate for state auditor (see his comments last year on my analysis here and this year's, in audio, here).

In The New York Times, my friend and fellow economist Karl Case essentially agrees with me:

Do the math. Four years ago, the monthly payment on a $300,000 house with 20 percent down and a mortgage rate of about 6.6 percent was $1,533. Today that $300,000 house would sell for $213,000 and a 30-year fixed-rate mortgage with 20 percent down would carry a rate of about 4.2 percent and a monthly payment of $833. In addition, the down payment would be $42,600 instead of $60,000.

Sounds like a pretty good deal for potential homebuyers.  And remember, as bad as the housing price decline is for homeowners, it means that young people have more opportunities than they would have had if prices had stayed at their stratospheric levels of four years ago.

Comments

[Ed G. Mann]

Sounds good, how many are they selling?

GM has a bunch of cars too, all reasonably priced, according to their marketing gurus.

[Diane]

so let me get this straight I purchase a home, in 1981 for $XXX with 20% down payment / make payments (as agreed in the mortgage) pay taxes that based on the assessed value, make improvements, now at the time of retirement my home is worth less than what I put in it and could be on the market forever and this is a good thing? HOW'S THAT?
Sounds like redistribution to me.
Thank you, Art Woolf and to your friend, Carl Case for your fore thought on this matter and taking a BIG part of my retirement funds oh, ya along with my 401K that is 1/2 the value it was 2007 so that life will be easier for the future generation. I guess that's all I have to say.

[JC]

And what are those homeowners who counted on their homes as their retirement nest egg supposed to do - work longer?

Who will hire them?

There is a lot of subtle age discrimination occurring in the private sector.

A lot of dreams went out the window as a result of the failed economic policies of the previous Bush administration.

[Greg]

JC:

I wasn't Bush. It was Clinton who opened the flood gates for mortgages to people who could not afford them.

GET A LIFE!

[Allan Arbuckle]

Actually, the first nimbles in the mortgage debacle started with the Carter presidency. Clinton expanded the programs (with the help of Dodd & Frank) and then to make other matters worse sent Carter to North Korea to give away our nuclear secrets and access to uranium. I wonder what Carter's most recent trip will cost us?

[Morgan M]

Dianne, if you bought in 1981 you should still be ahead by a good margin. Prices have not declined by 25% in Vermont. Let's remember that the decline of the housing market has taken most of the country back to the level of 2003 or so, and probably later than that locally. The fast run-up in prices from the early 2000's was not sustainable.

Depending on where you sit, this is either a housing slump, or a housing correction. Based on long term trends, I think it's the latter.

[DCH1950]

The hope for change was supposed to include a restoration of everyone's financial situation. Let's see, it's been 1 yr and 8 months, there's been plenty of change... all for the worse. Thanks 'O'.

[GreggB]

Just sold our VT house for half what we paid in 2004. Whatever. The financial loss hurts, being free of VT is priceless.

[G. Cross]

Diane,

If the house you purchased in '81 is worth less than your investment in it and your 401K has lost half of its value, you have made a long series of poor decisions or have not so good financial advisors.

The house I purchased in '87 is currently worth about twice my investment in it and I have a list of potential buyers when I decide to sell. My IRAs have recently recovered to their high level which is substantially more than my investment in them. And, I don't even know how the economy works according to many posters on this site.

[Vermonter for Liberty]

The true increase in affordability of housing in Vermont is due to the drop in rental rates. I'd like to see some data on that trend. In Woodstock, the "For Rent' signs are almost as numerous as the 'Fpr Sale' ones. A trend that should only continue as people move south due to the lack of jobs, rising taxes and the high cost of living. A silver lining for trustifarians and people living on the dole.

[Ed G. Mann]

I too have phenomenal fortune with my holdings.

Via the information offered by the Endowed Chair at the Sanders School of Economic Awareness, I enrolled in the online investing courses at the Universidad de Caracas.

Simply stunning how fast my wealth in fava beans and palm oil increased through confiscatory redistribution; I quadrupled my bean holdings in 4 days from two bushels to slightly over eight. And oil, I have enough to give the capitalist yanquis coronaries 10 times over.

Since I put windows and a door in my house, the market value nearly doubled that of the rest on the block. The government assessor (realtor) tells me a tin roof, versus thatch, makes the place eminently more salable. Too bad I have to sell it at preset Government Prices.

The largest change came about in savings, I have much more money in my pocket now since the electricity only works about half the time. I'd like to keep some of that but they mentioned raising taxes to pay for somebody else's health care.

At least I have invested wisely.