Wednesday, November 9, 2011
Low like the Lowest ever Low
The ratio of mortgage payment to median family income is the lowest on record, according to a new report from Fiserv.
The company noted that purchase mortgage payments now account for just 13 percent of monthly median family income nationwide, which is the lowest figure since 1971, when data first started being collected.
In Las Vegas, the ratio has fallen to 11 percent from 32 percent!
Back in the first quarter of 2006, when mortgage lending moved at a frenzied pace and home prices only moved in one direction, the national number was 23 percent.
In areas where home prices exploded upwards, the number was probably beyond 50 percent, forcing many borrowers to go with teaser rates tied to option arms while simultaneously stating their income.
That explains why just a year or so later we experienced the worst housing bust ever.
Families Spending Less on the Mortgage
Nowadays, families are throwing a lot less of their income towards their housing payment each month, thanks to the near-record low mortgage rates and the reduced home prices.
Still, there are few buyers out there, evidenced by the continued weakness in purchase-money mortgage applications and faltering home prices.
The big issue continues to be consumer confidence, which has risen and fallen as new economic dramas unfold on a seemingly daily basis.
Until that business is resolved and the job market improves, it is expected that home sales (and prices) will remain flat.
Meanwhile, mortgage underwriting standards are a lot tougher than they had been during the boom, making it difficult for many to take advantage.
Then there are the millions stuck in their current properties thanks to issues like negative equity.
First-Time Homebuyers Rejoice
Unfortunately, this means many people aren’t able to benefit from this somewhat unprecedented situation, namely those with underwater mortgages.
But first-time homebuyers have the opportunity to get in on the cheap and position themselves much better than existing homeowners.
After all, if you buy now for say $200,000 and your neighbor (who isn’t going to walk away) owes $400,000 for a similar property, you’re looking pretty good.
That’s right. The current homeowner is banking on you, the new buyer, to buoy the housing market and get them back in the black. Assuming that happens you’ll experience some kick-butt appreciation.
Just be patient; it may take a while. Fiserv expects home prices to decline 3.6 percent into mid-2012 before rising 2.4 percent in the second half of 2012 through the first half of 2013.