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Tepid wage growth and rising house costs prices out low-income households
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2014 Aug 13, 11:08pm 1,018 views 3 comments
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Tenpoundbass
2014 Aug 14, 2:43am
Tenpoundbass
2014 Aug 14, 2:43am
HAMP
TARP
was all to keep and make housing affordable, while in design helped create the next bubble. While it benefited far less than 2% of the population.
I was damn lucky the FHA overhaul helped get me get a house.
I was making over 120K a year at the time I bought, and was buying a house only worth 160K. I had to grovel, and jump through 50 hoops before we closed on the house.
There's no way I would have gotten that loan had I made 80K or less. Which a still over your average American middle class dual income.
http://ochousingnews.com/blog/tepid-wage-growth-rising-prices-prices-low-income-households/
Each prospective buyer investigates current financing terms as part of their process. Lenders apply current underwriting standards and determine the loan balance they will approve and down payment required before they will fund. Since loan plus down payment equals maximum bid amount, prospective buyers house-shop with the budget established for them by their lender. As is human nature, most people spend their full budget.
Every buyer goes through this basic process, and since financed purchases dominate the resale market, price levels of individual properties become tethered to the incomes of individuals who desire that property. If high wage earners suddenly became enamored with living in condos, prices would rise substantially. The substitution effect to similar resale and rental properties keeps income, price and quality in balance.
When supplies are limited, as they are now due to the presence of so many underwater borrowers stuck in the purgatory of cloud inventory, the substitution effect forces buyers at every price level to buy a lower quality house than they otherwise would. At the very bottom of the housing ladder, those buyers who can only afford the least expensive properties get priced out by higher wage earners substituting downward. If the inventory restriction is bad enough, large swaths of wage earners are priced out of the market, and sales volumes necessarily suffer — just as we are seeing today.
Source: http://ochousingnews.com/blog/tepid-wage-growth-rising-prices-prices-low-income-households/#ixzz3AN5MF2UQ
#housing