BluefoxToday blog : Residential real estate becomes more affordable

It's a delight to be able to report some good news, for a change. So far it has been just about everything else but them, so let's get right down to it. Before the tide turns. The soft real estate market continues to keep us steady company in most regions of the land, but there actually is at least one benefit to it. It's a basic principle of real estate economics, namely that as prices fall, housing becomes more affordable.

A national study was done on the issue for the second quarter ending in June, 2007, and it found that the affordability index grew to 43.1%, up from 40.6% for the same time last year. That is a solid improvement. The survey was conducted by the National Association of Home Builders, or NAHB, together with Wells Fargo Bank. Declining home prices and slightly better incomes are responsible for the upturn, an encouraging sign for the overall economy.

The study looks at the median income of households, on one hand, and the sales figures of new and existing homes in each sample market plus the current mortgage rates, on the other, and then arrives at its ratings. To be considered affordable, housing expenses cannot exceed 28% of income.

From the large metro areas Indianapolis got the top spot with an 86.8 rating, meaning that only about 13% of the homes over there were out of reach for the average family. Detroit's number was 86% and Buffalo's 84.8%. California cities dominated the least affordable places, Los Angeles leading the way with only 3.0%. In other words, 97% of the homes were off limits to your typical households. No wonder Californians are packing up and moving to neighboring states, including Nevada.