Home Affordability Returns to Pre-Bubble Levels - The Wall Street Journal
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.
Data provided by Moody's Analytics track the ratio of median home
prices to annual household 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.
Most economists believe the housing boom took off in 2003.
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.
Read the full story...