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
According To Cole 