Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (46728)	12/6/2005 12:47:52 PM
From: ild	Read Replies (1) \| Respond to of 110194

From today's Contrary Investor The National Association of Home Builders and Wells Fargo have put together what they term the Housing Opportunity Index (HOI). Quite simply, it measures the share of homes sold nationwide that would have been affordable to a family earning the median income. This index incorporates and relates two key pieces of information - household income and real estate prices. What the current reading is saying is that only 43% of families in the US could have afforded homes sold at current prices. Underneath these calculations is an assumption that families spend only 28% of their household income on housing. Once again, interpreting the current data, 57% of homes sold recently were to families who have committed more than 28% of their current income to paying the mortgage bill, so to speak. And we know that the western region is having a profound influence on these aggregate numbers. In the recent data, the HOI for San Francisco was 8.1%. Only 8.1% of the folks in the city could have afforded buying a home using 28% of family income to carry the financing. Los Angeles in the period was an eye-popping 2.4% HOI. Incredible. Alternatively, a number of cities in Ohio and Michigan ranked very high on the list of affordability in the period - in the 90% range. Of course the history of the data you see below gives us a good dose of perspective as to how aggregate affordability has changed over the last decade. The bottom line is that household income has not kept up with residential real estate price changes. As you know, the plug factor creating what you see below is leverage. idorfman.com