Portland Metro Housing Affordability
Posted on July 10, 2008
Filed Under Portland, bubbles, Statistics, Selling Real Estate, Buying Real Estate, Real Estate |
In the interesting but not definitive category:
Each quarter RMLS publishes a little talked about Housing Affordability Index, another due out when they release June numbers in a week or so. It takes into account median family income (via HUD), median home prices and prevailing interest rates; then, assuming 20% down on a thirty year fixed mortgage, calculates the affordable payment for the median income vis a vis the median home price. At 100, according to the theory, the median income family can exactly afford a median priced home.
Here’s the one for the March 08 reporting period:
I’m not sure the formula itself is remarkable; there are simply too many individual variables.
But as with most stats, it’s the trend where correlation can be found.
Note September, 2005 is the last time the index was over 120%. The median price was $249,000, median income $67,900 and a thirty year fixed 5.77%. By November the median was $252,500 and - with the very narrow exception of February, 2006 and April, 2007 - was the last month there’s been a YoY increase in sales.
So I went back and checked history:
The last time we had consistent YoY declines in sales were the last two quarters of 1999 and the first three quarters of 2000, back to back years with aggregate sales declines. The index correlates.
Is it meaningful?
We’ll know when we’re back to 121%.
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