Veteran Southern California real estate analyst G.U. Krueger adds his commentary on the housing market to this blog in a spot we call “Thursday Morning Quarterback.” Here’s his latest installment. …
Housing affordability is up, but there’s not enough improvement in Orange County.
Some not-so-good local news lurks behind the “National Affordability At Record High” headline hoopla from the National Association of Home Builders/Wells Fargo Housing Opportunity Index.
Orange County home affordability – by the NAHB/Wells metric index — has improved. But the county still suffers from one of the lowest affordability levels in the country, ranking No. 222 out of 225 US metros –just ahead of of the arguably most expensive metros in the U.S. Namely, San Francisco, Honolulu, and New York.
Relative low housing affordability may already be an Orange County economic development issue. If the economy improves as predicted, housing costs will become an issue for Orange County, creating trouble for local employers in attracting talent to the area.
U.S. housing affordability was at an all time high 2011′s final quarter, as 75.9 percent of all new and existing homes sold were affordable to families earning the national median income of $64,200. (Orange County’s affordability? highest since the opening quarter of 2009, but still just 47.4 percent!)
The high national affordability numbers shouldn’t be a surprise given the massive home price declines and record low mortgage interest rates. But if affordability is so high, why are new and existing home sales so low?
NAHB’s answer: Tight credit standards that make cheap mortgages hard to get.
But this has become the chorus of housing lobbyist. I ‘d really appreciate it if the industry’s big economics departments would do a little bit more research (a search for “tight credit conditions” on the NAHB’s website yielded only a Fed chair Ben Bernanke quote):
- What’s the long-term trend on average FICO credit scores of U.S. households?
- What impact did the Great Recession have on FICO scores by income, ethnicity, region, etc.?
- What are FICO scores of government-backed loans by Fannie, Freddie and FHA — by region and metros?
- Why has Fannie and Freddie shifted to the crème de la crème of households with high credit scores?
- And why do some households with the same credit score get rejected; and some are not?
Tight credit conditions do likely impede the nation’s housing market. But we know really very little about actual credit conditions, which are shrouded in a world that few have the privilege to visit.
High affordability is a fine notion. But what’s really going on in credit land, famous for its bifurcated transparency, lots of information for the high-paying classes, and funky Band-Aids for the masses?