PORTLAND, Me. - Despite a widespread sense that real estate has never been more expensive, 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.
A sharp fall in mortgage rates since the early 1980's, a decline in mortgage fees and a rise in incomes have more than made up for rising house prices in almost every place outside of New York, Washington, Miami and along the coast in California. These often-overlooked changes are a major reason that most economists do not expect a broad drop in prices in 2006, even though many once-booming markets on the coasts have started weakening.
The long-term decline in housing costs also helps explain why the homeownership rate remains near a record of almost 69 percent, up from 65 percent a decade ago.
Nationwide, a family earning the median income - the exact middle of all incomes - 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 has increased since 1998, when it hit a low of 17 percent before house prices began rising sharply in many places. Although the overall level has reached its highest point since 1989, it remains well below the levels of the early 1980's, when it topped 30 percent.
"This is a good deal - a good, fair price," Dale Ruttenberg, a 53-year-old bar manager said of a tan one-bedroom bungalow, with a remodeled kitchen and finished hardwood floors, that he is buying for $211,000 after having rented in Portland for most of the last decade. "Within a couple hours of being here, it was like, 'I'm home.' "
In high-profile places like New York and Los Angeles, home to many of the people who study and write about real estate, families buying their first home often must spend more than half of their income on mortgage payments, far more than they once did. But the places that have become less affordable over the last generation account for only a quarter of the country's population.
Elsewhere, families tend to spend far less on housing. In Dallas, the share of income needed to buy a typical house has fallen to 13 percent this year, from 14 percent in 1995 and 31 percent in 1980. In Tampa, it has dropped to 21 percent, from 26 percent in 1980. Even in New England, where the soaring prices of the last decades have frustrated many young families, house values have still not reached the heights of the early 1980's, when calculated as a share of income.
"Over 20 years, affordability has definitely improved because interest rates are much lower," said Kenneth T. Rosen, chairman of the Fisher Center for Real Estate and Urban Economic Research at the University of California, Berkeley. Houses have also grown bigger during that time, he said, so people are getting more for their money.
Here in Portland, a smaller version of the big-city real estate boom has been in full swing until just the last few months. House prices have jumped since 2000, hundreds of new real estate agents have gotten their licenses and an old factory along the waterfront, once famous for making bright-red hot dogs, is set to be replaced with condominiums.
With many suburban houses now selling for $300,000 and up, young families have a much harder time buying their 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.
Beyond cost, many families who simply could not have bought a house 10 or 20 years ago find themselves able to do so, thanks to changes in the ways banks lend money. In the past, a home buyer often needed to make a down payment equal to 20 percent of a house's value to get a mortgage; today, little or no down payment is common.
The most money that Tim W. Gilbert has ever had in his possession was $15,000, he said, in the form of a check for a job he had done as a carpenter. But he and his wife, Marjorie, were still able to buy a 1936 Cape Cod-style house this year for $176,000 in Poland, about 45 minutes north of Portland.
They took out two mortgages rather than making a down payment and they use Mr. Gilbert's $5,000 or so in pretax monthly income to cover $1,600 in mortgage, tax and insurance payments. Ms. Gilbert, a writer, home schools their daughters, ages 4 and 6. "I paid rent for 18 or 19 years," Mr. Gilbert, 38, said. "We waited years and years. We wanted to make this happen."
http://www.nytimes.com/2005/12/29/realestate/29afford.html?ex=1293512400%26en=c879fd45fe416f13%26ei=5088%26partner=rssnyt%26emc=rss
