Congress Considers Boosting Home Affordability
Written by Marilyn Bowden on October 9, 2003
By Marilyn Bowden
Home prices rose nearly 25% in the Miami area in the past year, according to the Florida Association of Realtors. And faced with sharp increases in home costs across the country, Congress is considering legislation to boost affordability.
The Florida association said that based on a survey of Multiple Listing Service sales, the median price of a home in the Miami metropolitan area increased to $241,000 in August from $194,600 in August 2002. The 24% jump was the steepest increase statewide.
"Fortunately or unfortunately," said Marla Martin, a spokesperson for the state association, "South Florida is a very popular place, and it is running out of land."
Rising home prices that far outpace income gains are causing concern among housing analysts. The Meyers Group, a research firm that studies trends in the residential market, gave the national affordability index for August a grade of C. The index measures the number of households that can afford a median-priced existing home, assuming a 20% down payment, interest rates on a 30-year fixed mortgage and property taxes.
In its August Housing Analysis, Meyers reported that only 51.4% of US families can afford a median-priced home of $182,100. The high was 58.6% in 1996, when the median price was $110,000.
Lawrence Yun, an economist at the National Association of Realtors in Washington, said the affordability crunch is much worse in Miami than in the rest of the US.
"During first-quarter 2003," he said, "the median income in Miami was just 104.5% of the median annual cost of owning a home. The average for the whole country was 144%."
According to Meyers, "because low mortgage rates have been a critical factor buoying affordability in recent years, some analysts fear that affordability will drop at a steeper rate than in previous cycles once mortgage rates post steady and significant gains."
Congress is considering legislation that would help first-time homebuyers with the mounting costs of buying a house, said Linda M. Johnson of the National Association of Realtors.
She said the American Dream Downpayment Act, introduced by Florida Rep. Katherine Harris passed in the House of Representatives last week. Colorado Sen. Wayne Allard has introduced a companion bill in the Senate.
The act that would provide $400 million in grants over the next two years through the US Department of Housing & Urban Development’s Home Investment Partnership program to help 80,000 low-income families with the down payment and closing costs on their first homes. Under the program, Ms. Johnson said, households with annual incomes of less that 80% of the area’s median income could receive an average $5,000 through the program.