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

April 5, 2010 — Leave a comment

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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