Cooling Home Values In Some Metro Areas.
Granted, in home prices in 2011 had fallen, but the point is that affordability has fallen. A 15% pay increase is NOT enough to keep up with a 48% price increase. A couple making $100k in 2011 would be making $114k today. A $300k home that increase even 40% in value would be $420k. A $14k income increase does not offset a $120k price increase by any measure. Pure and simple, the DTI would be higher AND the down payment requirement to get to 80% LTV would also be significantly greater. When you factor in the 1% increase in interest rates it gets even worse from an affordability standpoint. FRANK & BRIAN, YOUR CONCLUSIONS ARE CORRECT.
The numbers obviously are different for different markets, and even within the same cities you have hot spots and cooler areas. There is quite a conundrum in some markets where inner-city growth is where the younger generation wants to be….but the reality is that they are finding things more affordable on the outskirts of the city limits. As a result, many are choosing to rent instead of buy.
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