Housing Affordability Shows Long-Term Gains

REALTOR® Magazine Online
Housing affordability has shown a pattern of improvement since the 1980s, according to data from the U.S. Census Bureau, Economy.com, and The New York Times.

Although U.S. residential prices have registered major gains, the country's home ownership rate has not suffered. As of last year's third quarter, 68.7 percent of Americans owned their homes—up from about 65 percent in 1980 and not far off the 40-year high of 69.4 percent documented in the second quarter of 2004.

Moreover, income levels are higher; while borrowing costs are lower. As a result, the share of pretax median income required to qualify for financing on a median-priced home is down from 25 years ago.

Borrowers in 2005 needed just 23.7 percent of their pretax earnings, compared to about 30 percent in 1980.

Some major metro areas are bucking the trend toward better affordability, however. Housing affordability has dipped to 12.5 percent in Detroit from 12.9 percent in 1985, for instance, while sinking to 14.6 percent from 29 percent in Dallas.