have you looked at the affordability index for housing, lately??

the affordability index shows housing is now more affordable than it has been in the past 20 years.  how did we get here?  according to the case-shiller home price index home prices began to fall in the summer of 2006.  overall this decline has been pretty deep with some regions posting a 50% decline.  2009 was rough….well, VERY rough!  last year the US experienced the largest annual fall in home prices, hit the highest number of delinquent mortgages measured, watched a RECORD 918,000 homes fall victim to foreclosure, AND 11.3 millon home owner are now upside down in their homes.  every single element – falling prices, mortgage lates, foreclosures, negative equity – all hit RECORDS in 2009.  ok, take a deeeeeep breath….exhale….2009 is now behind us – so we can now move on to bigger and better things like the current trend of housing. 

first of all the case-shiller report showed that the annual rates of decline of the 10 & 20 city composites improved in january compared to december ’09 and are FLAT compared to a year ago.  in fact the 2 composites haven’t been this close to positive territory since january 2007, more than 3 years ago.

one of the most interesting charts (and most silver lining-ish) is the Residential Property Affordability Index – this shows that affordability is at its best for 20 years!! this is consistent with falling house prices AND improving household’s balance sheets – both disposable personal income AND household total financial obligations as a percent of income are back to 2000 levels.  see chart

last but certainly not least – an update on the building housing demand tsunami…..housing starts are STILL well below historical averages. 

conclusion:

affordability index at 20 year high + home prices down + low interest rates + jobs being created + housing starts WELL below historical averages = housing demand tsunami

according to cole you the housing demand tsunami is beginning to build….get ready.

-cole

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