|
All right, it is not a real equation, but if we spell it out, you will see that it adds up to this:
Historical trends suggest that per capita income growth will continue to lag appreciation in home prices over the long term. Young people and those trying to enter the housing market for the first time face a difficult situation today and a growing gap in the future.
Oregon Employment Department1
And those who can’t buy must rent.
OUT OF REACH
Moderate-wage earners and first-time home buyers are locked out of homeownership in Portland. The graph below shows the gap between growth in the House Price Index (HPI) and the growth in Per Capita Personal Income (PCPI).2
As long as there is a growing gap, there will be growing pressure on the rental market.
MORE JOBS=HIGHER HOUSE PRICES
Factors supporting appreciation:
• Employment up 13% in ten years; forecasted to outpace nation.3
• Mortgage rates low, lending standards have been relaxed.
• Effective user cost has stayed low even as prices go up, bringing more buyers into the market.4
The people who would have normally bought their first [Portland] house in 2007, they bought in 2005. So here it is in 2007. Can we get the people who would buy in 2009 to buy now? No. Because prices are too high.
Bill Conerly, Senior Fellow at the National Center for Policy Analysis.5
HIGHER HOUSE PRICES=MORE RENTERS
In March, a household with the Portland median income of $63,800 could afford only 95% of the median home price, which is the lowest level of affordability measured since the Regional Multiple Listing Service began tracking the numbers in 1994.6 Over 60% of households bring in less than $75,000.7
The number of buyers in the market will also shrink if banks are forced to tighten lending practices. Freddie Mac has announced that it will no longer buy some types of foreclosure prone mortgages,8 and the Oregon State Senate passed a bill in May designed to limit subprime lending.9
But what about the bursting bubble? In areas where there was speculative buying during the boom house prices are now depressed as the inventory is coming back on the market. Not so in Portland. Prices continue to rise here, unlike Phoenix, where in 2005 people stood in line just to get on lists to buy new homes. Prices peaked there in June 2006, and fell 2.6% in the last half of the year.10
 THE SOLUTION TO THE EQUATION
Income in the Portland MSA will grow only 3.43% over the next five years.11 The affordability gap continues to grow, creating a larger pool of renters for the foreseeable future.
www.Tfn-IRE.Com
VIEW SOURCES
|
