Archive for Home Values
Home Affordability Reaches Record-Levels… Last Quarter.
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Last quarter, with home prices still relatively low and mortgage rates making new, all-time lows almost weekly, the cost of home ownership was extraordinarily low in Lake Geneva, Wisconsin and most U.S. markets.
According to the National Association of Home Builders’ quarterly Home Opportunity Index, 72.5 percent of all new and existing homes sold between June-September 2010 were affordable to families earning the national median income. This ties the all-time high for home affordability, set in the first quarter of 2009.
The data also underscores that, when compared to historical norms, it’s a fantastic time to be a Lake Geneva real estate home buyer.
Prior to 2009, the Home Opportunity Index rarely topped 65. The index has remained above 70 ever since.
All real estate is local, though, and on a city-by-city basis, home affordability varied last quarter.
For example, 96% of homes sold in Kokomo, IN are affordable for families earning the area’s median income. This handily beat the average figure and led the nation. Looking at major cities, Indianapolis led the pack.
93% of homes in Indianapolis are affordable to families earning the area’s median income. This ranks #9 nationwide.
The Milwaukee – Waukesha – West Allis, Wisconsin real estate market in which we are included, ranked 130th nationally and 35th regionally with an index of 77.3% respectively.
On the opposite end of the affordability scale is the New York-White Plains, NY-Wayne, NJ region. For the 10th consecutive quarter, the New York Metro region ranks last in U.S. home affordability. Just 23% of homes are affordable to families earning the local median income, although this is 3 points higher versus Q1 2010.
The rankings for all 225 metro areas are available online.
Regardless of where your hometown ranks relative to its neighbors, home affordability remains high as compared to historical values. That said, with mortgage rates rising and home sales expected to climb this winter, it’s unlikely that the Home Opportunity Index will improve.
Buying a home may never be this inexpensive again. If you planned to buy in mid-2011, consider moving up your time frame.
Which Model Is More Accurate: The Case-Shiller Index Or The Home Price Index?
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The private-sector Case-Shiller Index reported home values up 5 percent nationwide in June. The government’s own Home Price Index, however, reached a different conclusion.
According to the Federal Home Finance Agency, month-to-month home values fell 0.3 percent in June, and values are down by 1.7 percent from June 2009.
So, as a home buyer and/or homeowner of Lake Geneva real estate , by which valuation model should you make your bets? Perhaps neither.
This is because both the Case-Shiller Index and the Home Price have inherent methodology flaws, the most glaring of which is their respective sample sets.
The Case-Shiller sample set, for example, comes from just 20 cities across the country — and they’re not even the 20 most populated cities. Together, the Case-Shiller cities represent just 9 percent of the overall U.S. population.
That’s hardly representative of the housing stock overall.
By comparison, the Home Price Index tracks home sales everywhere — every city in every state — but it specifically excludes certain properties. The Home Price Index does not track sales of homes for which the financing comes from agencies other than Fannie Mae or Freddie Mac. This means that as FHA loans grow in popularity, the pool of Home Price Index-eligible homes is reducing.
The HPI ignores homes backed by “jumbo” loans, too.
Therefore, the “right” model for home values cannot come from national data at all — it can only come locally. Neither Case-Shiller nor the government has the tools to get as granular as a neighborhood. A Lake Geneva real estate agent does, however.
The best way to get a pulse for what’s happening in markets right now is to talk to somebody with good data.
Home Opportunity Index Ranks 225 Metro Areas For Affordability. Wisconsin Scores Well.
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With home prices still relatively low and mortgage rates trolling near their all-time best levels, it’s no surprise that home affordability is extraordinarily high for Lake Geneva real estate and most U.S. markets.
According to the quarterly Home Opportunity Index as published by the National Association of Home Builders, more than 72 percent of all new and existing homes sold between January-March 2010 were affordable to families earning the national median income.
It’s the second highest reading in the survey’s history.
Of course, on a city-by-city basis, home affordability varies.
In the first quarter of 2010, for example, 98.7% of homes sold in Bay City, Michigan were affordable for families earning the area’s median income and in Indianapolis, the percentage was almost 95 percent.
Indianapolis has held the top quarterly ranking for close to 5 years now.
Wisconsin cities scoring well include:
- Madison with 85.1%
- Milwaukee / Waukesha / West Allis with 82.3%
- Kenosha with 74.2%
On the opposite end of the spectrum, the New York-White Plains, NY-Wayne, NJ region earned the “least affordable” metropolitan area for the 8th consecutive quarter. Just 20.9% of homes are affordable to families earning the local median income.
The rankings for all 225 metro areas are available on the NAHB website but regardless of where your town ranks, home affordability remains high as compared to historical values but it likely won’t last long. Home values are recovering in many markets and mortgage rates won’t stay this low forever.
All things equal, buying a home may never come this cheap again. If you were planning to buy later this year, consider moving up your timeframe.