Housing Affordability at All-Time High
Ezra Klein is a bit bemused:
In a further signal that economic indices have a taste for irony, an index released by the National Association of Realtors shows that housing affordability was at an all-time high in December. A family earning the median income has 158.8 percent of the income needed to qualify for the mortgage on a median-priced house. And prices are likely to fall even further in the coming months. It’s going to be a good time to buy, even if it’s not going to be a good time to, you know, keep your job. And hey, it’s (probably) a safer investment than the stock market.
Now, I’m dubious of statistics provided by interest groups, so take NAR’s claims with a grain of salt. But Ezra isn’t challenging the stats but rather the suggestion that it’s good news.
But, barring this thing getting far worse than any reasonable projections I’ve seen, virtually everyone will in fact keep their job. Is anyone suggesting unemployment rates even as high as 10 percent? So, this means that the market has responded correctly to a bursting bubble: Prices for housing have dropped to levels affordable to the people who need to buy them. That’s a good thing.
In troubled times, it makes sense to be prudent. But, while irrational exuberance is hazardous, so is irrational gloominess. Acting as if you’re destitute because slightly more people are experiencing bad times than were doing so a few months ago is not only bad for your own quality of life but contributes to a vicious cycle that slows down the recovery.
If you were otherwise going to go out to a restaurant, buy a new car, or move from an apartment into a house and have no specific reason to think your job’s going away, why wouldn’t you go ahead an do those things?
Photo by Flickr user HolyHolySnappers under Creative Commons License.