Ignore Those Numbers in Your Bank Account: You CAN Afford to Buy a House Here
A new report from Moody's Economy.com looks at affordable housing across the country and concludes that houses have become only slightly less affordable in the Washington area over the past 20 years. I don't know about you, but in my reality, this says more about the foolish nature of statistical studies than it does about the Washington housing market.
The study, cited in the New York Times last weekhttp://www.nytimes.com/2005/12/29/realestate/29afford.html , takes into account both the lower interest rates and the reductions in size of down payments, so that skews the result a bit. But still: Does anyone around here really believe that housing requires only seven percent more of your income today than it did 20 years ago?
The Moody's study puts our region at the top of the second tier of most expensive cities for housing. San Francisco leads the pack, followed by New York, LA and Miami, all of which suffer from housing costs that eat up between 41 percent and 52 percent of average income to buy the median house. Then comes the next group, led by Washington, Seattle and Boston, with housing taking up between 28 and 32 percent of income.
Obviously, in any metro area there are still some relative bargains to be had, and ours is no exception. Prices in Prince George's, for example, are considerably lower than in Montgomery, Arlington or Fairfax. Outer counties still cost much less than inner counties. But prices are up everywhere. The flaw in this study is the decision to factor in the changes in size of down payments and similar declines in mortgage fees.
Bottom line: Real estate is a game for people who are already in it. If you are somehow in the game--got in early, inherited property, got in on a condo conversion at an insider price--then you're golden, because you can ride the prices as they soar, spending your winnings from sales on better and bigger places as you age. But if you're stuck on the outside looking in, fohgeddaboudit. Study, shmudy.
By Marc Fisher |
January 3, 2006; 7:33 AM ET
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