Buying & Selling: Homes Still Out of Reach for Most

Reuters reports that despite the vaunted claims of the market being geared to buyers, homes are still too expensive for most to buy:

While the median home price in the 202 largest metropolitan areas declined 2 percent from a year ago to $248,000 in the third quarter of 2006, mortgage rates rose enough over the year that homes actually became less affordable as pay did not keep pace. "The real story is what happened to salaries," Lipman said. "Lower-paid occupations -- such as in retail, or home health workers -- their salaries went up only about 3 percent."

It's as I've said many times now: This last housing bubble was a deliberate attempt to leverage greater corporate profit through increased consumer indebtedness. Home prices were pushed to the limit thanks to bottom-barrel interest rates and cheap money, and consumers were deliberately encouraged to buy beyond their means, using toxic mortgage instruments that they didn't understand.

Now we're seeing the results--stagnant markets, fearful buyers, frustrated sellers, subprime lenders dying, and foreclosures continuing to increase.

Lipman's point about solving the problem (in addition to wage gains):

"For the low- to moderate-income individuals that we're talking about, they're not going to be helped by marginal declines in home prices," Lipman said. "The only way to address the problem is to create more affordable units (homes) -- which may mean higher density units, townhouses and condos."

And conveniently enough, there's still a ton of unsold condo inventory on the market that fills the bill. Once developers get their minds right and sellers drop prices, those units will move and people who've been priced out of the market can get in the game.

I hope.

(Image courtesy of The Affordable Housing Institute.)

Posted at January 10, 2007 12:48 PM

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Reuters reports that despite the vaunted claims of the market being geared to buyers, homes are still too expensive for most to buy: While the median home price in the 202 largest metropolitan areas declined 2 percent from a year ago to $248,000 in the third quarter of 2006, mortgage rates rose enough over the year that homes actually became less affordable as pay did not keep pace. "The real story is what happened to salaries," Lipman said. "Lower-paid occupations -- such as in retail, or home health workers -- their salaries went up only about 3 percent." It's as I've said many times now: This last housing bubble was a deliberate attempt to leverage greater corporate profit through increased consumer indebtedness. Home prices were pushed to the limit thanks to bottom-barrel interest rates and cheap money, and consumers were deliberately encouraged to buy beyond their means, using toxic mortgage instruments that they didn't understand. Now we're seeing the results--stagnant markets, fearful buyers, frustrated sellers, subprime lenders dying, and foreclosures continuing to increase. Lipman's point about solving the problem (in addition to wage gains): "For the low- to moderate-income individuals that we're talking about, they're not going to be helped by marginal declines in home prices," Lipman said. "The only way to address the problem is to create more affordable units (homes) -- which may mean higher density units, townhouses and condos." And conveniently enough, there's still a ton of unsold condo inventory on the market that fills the bill. Once developers get their minds right and sellers drop prices, those units will move and people who've been priced out of the market can get in the game. I hope. (Image courtesy of The Affordable Housing Institute.)