House Prices Most Affordable Since '70s?

Discounting the possibility that the air will soon come out of rising house prices, the chief economist at Standard & Poor's has told a National Association of Home Builders conference that prices are not out of whack, but more affordable than at any time since the early 1970s. "Costs are rising with incomes, which is what they're supposed to do," David Wyss said at the NAHB's Construction Forecast Conference. He pointed out that the average price of existing homes is now 2.6 times average household income, about the same as in most of the 1990s. "In the late '70s, the ratio was over 3.0 times -- that's a bubble," he said. "But now, the ratio's about as flat as it can be." While some have expressed concerns about rising mortgage debt, the economist said that because of today's relatively low mortgage rates, Americans are rushing to buy because it's cheaper to own than rent. "That's what you're supposed to use debt for, so your balance sheet improves," he said. Mr. Wyss is more concerned that today's owners are more highly leveraged than their predecessors, largely as a result of the most recent refinancing binge.

Home |  Contact Us  |  Sitemap