Same old housing news at years end. Whether we are in a bubble or not seems to depend on how much you have invested in the bubble. :) The final quote about saving money by renting says a lot to me about prices today.
Affordability is important for everyone because housing is a cycle dependent on buying-in and upgrading. If people cannot buy in, that virtuous cycle stops.
Stay tuned for next year when we get to see the start of Greenspan's asset-spending legacy.
Housing Affordability Hits 14-Year Low
Higher Prices, Rising Rates Hurt Buyers as Creative Loans Lose Some of Their Punch
December 22, 2005
Soaring house prices and higher mortgage rates have put homeownership out of reach for more people than at any time in more than a decade.
Housing affordability in October sank to its lowest levels since 1991, according to the National Association of Realtors' Affordability Index, a widely followed measure of the average household's ability to buy a home at current interest rates. In some areas, including New York City, Los Angeles, San Diego, San Francisco and Miami, housing affordability has dropped to levels not seen since the early to mid-1980s, according to mortgage giant Fannie Mae.
Affordability has long been a problem for low-income home buyers. But as home prices have marched steadily higher in recent years, many buyers with healthier incomes also are being squeezed. Declining affordability mainly affects whether first-time home buyers will enter the market, but in some markets people who already own a home are finding it tough to trade up.
Despite the drop in affordability, the percentage of households that live in a home they own is at near-record levels. Mortgage rates, though edging higher, are still relatively low by historical standards. And lenders have helped to offset declines in home affordability with creative mortgage products, such as interest-only loans, that allow borrowers to stretch into a more expensive home, while keeping their monthly payments down. But rising short-term interest rates are eroding the effectiveness of many such mortgages.
In 57 of 379 metro areas nationwide, homes were so expensive in the third quarter that a family earning the median income couldn't afford the median-priced home based on traditional lending standards, according to Moody's Economy.com. Sixteen markets have joined the ranks of unaffordable areas over the past year, according to the analysis.
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And renting remains a bargain in many parts of the country. Stephan Vrudny, an engineer who lives in San Diego, sold his three-bedroom condo to an investor in June for $405,000, then rented it back for $1,500 a month. Mr. Vrudny figures the arrangement is saving him $430 a month, even after taking into account the lost mortgage-interest deduction. "We'll be homeowners again when it makes sense again as an investment," says Mr. Vrudny, who had purchased the unit for $345,000 last year.
Selling their own company stock? For shame.
A Housing Slowdown? Not if You Ask Builders
Sales Soften as Inventories Rise, And Critics See Stock Prices Behind Added New Construction
December 22, 2005
Everyone has heard the housing market is showing signs of slowing. But the companies that build homes aren't going to let popular wisdom gum up their works -- or their stocks -- if they can help it.
New-home construction rose 5.3% in November from the previous month, the largest monthly increase in housing starts since April and far above the level economists and analysts were expecting. The pace of applications filed by builders for future construction also picked up last month.
Traffic is down at new-home communities around the country. Real-estate agents are taking longer to sell homes, and homeowners in some areas have had to cut prices to trade out of their patch of the American Dream. Meanwhile, the number of unsold new homes under construction is at an all-time high.
Executives at some of the biggest publicly traded home-building companies say they're on top of their game and are managing their projects and landholdings in a way that won't leave them or shareholders exposed. Yet some of these same executives, including those at Toll Brothers Inc., have been net sellers of their companies' stocks this year, even as they cite the health of their industry. The Dow Jones U.S. Home Construction stock index is up nearly 17% on the year, although many builders' stocks are well off levels seen this summer.
