Some experts say that the United States is on the way to a housing recovery as home affordability is returning to pre-bubble levels in more and more cities in America.
Home values have fallen 2.6 percent in the last quarter and such a significant drop has not been seen since the first quarter of 2009. Moody’s Analytics tracks the ratio of median home prices to yearly household incomes in 74 markets. According to their data, housing affordability is about the same now as it was between 1989 and 2003 in 47 of those markets. It is believed by most finance experts that the housing boom began in 2003.
It was during the boom that house prices increased greatly due to lax lending and inflation. This increase was greater than the average increase in household income, thus the ratio of home prices to yearly household income peaked in 2005 at 2.3 percent. Since September of 2010, it has dropped to 1.6 percent, which mirrored the lowest level in 35 years.
Chief economist at Moody’s Analytics, Mark Zandi, states that these are very affordable prices for people based on incomes. Home price declines are drawing buyers back into the market and especially property investors.
According to other economists and housing analysts, further declines in home values between 5 to 10 percent may occur by late this year or early next year. With such a decrease, most believe that this will be the bottom and that prices will begin their increase from there.
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