Home Purchase Affordability Vs. Renting at 1990s Level

When home prices hit bottom as projected later this year, they will be 35 percent lower than their peak level in the first quarter of 2006, according to a new analysis of the housing market by Fiserv, Inc.
But already quite apparent is that homebuyer affordability is at an historic level as the ability to own a home is as close to rental affordability as it was in 1998.
Moreover, the ratio of the median single-family home price to the median family income is lower than any time since 1991, according to Fiserv.
The Fiserv Case Shiller Indexes, which monitor home prices and affordability, project that “this record-level affordability will eventually bring more first-time and trade-up buyers back into the housing market.”
Apartment rents continue to increase and new households are being formed, making buying a cheaper option than renting, Fiserv said.
This trend also hinges on the continuation of record low mortgage rates, which are not projected to increase significantly through next year.
Here are other highlights from the latest Fiserv Case-Shiller Indexes:

  • Some of the hardest-hit markets are expected to see the fastest growth during the recovery. Six of the 10 markets where annualized prices are expected to increase the most over the next five years have seen price declines of more than 50 percent from their peaks.
  • Conversely, home prices in markets that were spared the worst of the housing downturn are projected to grow at a slower pace. Texas, for example, represents 11 of the 39 markets where prices are projected to increase at an annualized 1.5 percent or less over the next five years.
  • Of the 30 best-performing housing markets in the 2011 fourth quarter, 13 had unemployment rates of seven percent or less and 14 had a median family income above the national average.
  • Seven of the 10 worst performing markets in 2011 had unemployment rates higher than the national average and median family incomes below the national average.
  • Twenty-two of the 25 markets that have seen the largest decline in home prices from the peak to the end of 2011 are in California and Florida.

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