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PARALLEL UNIVERSE: Finally, Some Reality Creeps into World of Realty; Housing Affordability Crisis Admitted by Trade Group

Posted by kinchendavid on July 16, 2006

By David M. Kinchen

Hinton, WV – Opening the familiar 10-by-13-inch white envelope from the Washington, DC office of the National Association of Realtors, I was startled to find a press release that addressed something I’ve long felt was ignored by housing trade groups: The lack of housing affordability for typical working and middle-class Americans.
There must be sundials at both the DC office of the NAR and the Chicago headquarters on Michigan Avenue that read: “I Count Only Sunny Hours.” This is the first time in recent memory I’ve come across a news release that addresses the real-life situation that faces many Americans – quite a few of them two-income families – the rapidly increasing lack of affordability of U.S. housing in virtually every market. All this despite the recent abrupt slowdown in housing inflation, something real estate brokers call “appreciation.”
The release is based on results of the fourth annual National Housing Opportunity Pulse, a survey by the NAR.
Here are some points from this unusually frank – and realistic – news release that deserve dissemination to those in the housing market, or those who have children that are going to be in the housing market:
* One in three Americans are worrying that rising monthly payments, rather than high down payments, are the greatest obstacle to buying a home.
* Rising property taxes are the leading concern associated with owning a home, 34 percent, followed by increasing electrical, fuel and other energy costs, 28 percent.
* Only 14 percent of those polled said rising mortgage rates would keep them from becoming homeowners.
Rather than mouthing the “Now’s the best time to buy a house” bromides I’ve heard in more than three decades of covering real estate at newspapers in Milwaukee and Los Angeles, NAR’s 2006 president Thomas M. Stevens from Vienna, VA said bluntly that “many families are struggling to meet the high cost of homeownership, and increasingly those costs are property taxes and energy utilities.”
Take this startling fact and chew on it for a while: In 2003, the average monthly mortgage principal and interest payment was $840. By 2005, families were paying 23.8 percent more or $1,040 a month. I doubt many people got a 24 percent increase in disposable income over the same period. The study didn’t mention the skyrocketing cost of property insurance, especially in coastal areas.
From 2005 to 2006, energy prices went up at an alarming pace, the release states: The Energy Information Administration estimates that in February 2006 the price of electricity was 12 percent higher than the previous February; natural gas was up 28 percent, and home heating oil was up 25 percent. State and local property taxes for the 2004 fiscal year average $1,121 per person, up 13.8 percent from FY 2003, when the average was $985.
The Pulse survey found that more than 42 percent of Americans cite the lack of affordable housing in their community as one of their top three concerns, following high energy costs (82 percent) and the lack of affordable health care (53 percent). Nearly a third worry that the cost of housing is so unaffordable that they will never be able to buy a home. For traditionally optimistic Americans, this is a dismal prospect.
* * *
Editor’s note: David M. Kinchen has been a member of the National Association of Real Estate Editors (NAREE) since 1971. He was president of the international specialty journalism association in 1984.


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