Real Estate is More Affordable Than it Once Was in Jacksonville

Author:	Lucas Jones
Source:	Homes Discovered
Date:	April 7, 2006

Despite a widespread sense that real estate has never been more expensive in Jacksonville, families in the vast majority of the country can still buy a house for a smaller share of their income than they could have a generation ago. Mortgage rates have fell sharpely since the early 1980's.  A decline in mortgage fees and a rise in incomes have offset rising house prices in about every market except New York, Washington D.C., Miami, and the California coast.  Economists do not expect a broad drop in prices in 2006 because of these changes. The long term decline in housing costs also helps explain why the homeownership rate remains near a record of almost 69 percent, up 4 percent from a decade ago. Nationwide, a family earning the median income would have to spend 22 percent of its pretax pay this year on mortgage payments to buy the median-priced house, according to an analysis by Moody's Economy.com, a research company. The share hit a low of 17 percent in 1998 before increasing dramatically in many markets.  While the overall level has reached its highest point since 1989, it still remains below the levels of the early 1980's, when it was over 30 percent. In certain high-profile places such as New York and Los Angeles many families buying their first home often have to spend more than half of their income on mortgage payments, much more than they once did.  These places account for only a quarter of the country's population. In other places families tend to spend much less on housing.  Dallas, for example, the share of income needed to buy a typical home has fallen to 13 percent this year, down from 31 percent in 1980.  Even in high profile places such as Tampa and New England house values have still not reached the extent of the 1980's, when calculated as a share of income. Affordability is up because interest rates are so low. As many suburban homes now selling for more than $300,000, young families still have a much harder time buying a first home than they did a few years ago.  Still, housing has been less expensive this year - as a share of local incomes - than at any point during the 1980's, according to Moody's Economy.com. Many families who could not have bought a house 10 or 20 years ago now find themselves able to do so because of changes in lending.  In the past people often had to make a large downpayment equal to 20 percent of a house's value to get a loan; today, little or no down payment is common. The main reason is a sharp fall in mortgage rates.  Upfront mortgage fees have also dropped.  Computers have made lenders more efficient and huge pools of global capital have brought more competition to a business that was once largely local. But when the list prices of houses in Jacksonville are climbing as they have recently, it is hard to imagine that real estate is more affordable than it used to be.

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