Housing most affordable in decades...

Here's some "mixed blessing news" from a recent CNN Money story. The typical U.S. family earning the nation’s median income of $64,000 a year could afford to buy 70.1 percent of all homes sold in the United States during the third quarter, according to a report from the National Association of Home Builders and Wells Fargo. The report relied on the government standard of spending no more than 28 percent on housing. In the same quarter of 2008, only 56.1 percent qualified.

The five most affordable areas are:

Indianapolis
Youngstown, Ohio
Detroit
Warren, Mich.
Grand Rapids, Mich.

The five least-affordable areas are:

New York City
San Francisco
Honolulu
Santa Ana, Calif.
Nassau and Suffolk, Long Island, N.Y.

That's great news...if you have a job, which some estimates for Michigan say would leave out about 20% of the population of Michigan. Interestingly enough, our estimated median income is higher than the national average at $72,591. (as estimated by Low-Income Home Energy Assistance Program (LIHEAP) Clearinghouse on September 24, 2009).

In another CNN Money article from April of this year they reported the county-by-county median incomes. Of course, Oakland County ranked high at $81,650, with Livingston County and Macomb Counties coming in at $103,385 (big surprise there) and $81,650 respectively. Wayne County clocked in at $63,020 and Washtenaw County felt the drag of Ypsilanti at only $60,605.

If one looks at the 28% of gross income for housing rule, you can see that people in Oakland County could afford homes with payments of about $1,900 per month, which would equate to a mortgage about $380,000. Believe me that would buy most of the nice homes on the market these days.

So home buyers have a very nice choice to make – either buy that bigger house now that you had on your wish list for the future or buy what you need now and sock the money away that you will save because of the lower prices and current low interest rates. Most financial advisers would likely recommend the latter course of action as a great way to save for the kid’s college or other future needs.

The other good thing that saving the extra money would do for you is to give you a cushion of savings to fall back on, should something happen to your job. Too many recent foreclosures happened because the owners were living right on the edge, pay check to pay check, with no leeway for any variation in income. Any little loss of overtime or job hours or any health related issue that kept them out of work for a while, put them over the edge. That’s why we are now seeing a wave of defaults in the Prime Mortgage space that is replacing the Sub-Prime as the biggest source of new foreclosures.

Of course, how people spend their own money is up to them. Let’s just hope that most have learned something fro the crisis that we are still in and will make lifestyle changes to adjust to the “new reality”. Maybe they could make a reality TV show about that. Naw…it’s too boring watching people do intelligent things.