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Housing Affordability

With home prices down from the big bubble and rates down as well, I was curious about the current state of housing affordability.

The latest stats I find show median household income at about $52,000 (2008). With rates at 4.5% or lower on a 30 year fixed mortgage, and a conservative underwriting, 28% of income for the mortgage and property tax, we’ll assume 24% is for the mortgage only. This is $1040/mo. At 4.5% this will fund a $205,000 mortgage, so with 20% down, a total house price of just over $250,000.

This graphic shows lower median home prices in all regions except the Northeast where income tend higher as well. Take that median income and you can afford a pretty nice home in the south or midwest.  Makes me wonder if we hit bottom, and if this is the time to buy. Of course, bottoms are really only seen in hindsight. For an interesting spin on the rent/buy decision, check out Monevator’s Reasons to buy a house instead of renting.

  • Michael T. Anderson November 2, 2010, 1:09 am

    I think we’ve hit the bottom in many of the major markets. Where I live, prices are slowly but surely climbing. It will take a long time for them to get anywhere near previous highs but at least they’re going up now instead of still plummeting.

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