Challenges for Homebuyers
Last year seemed to be a good one for the housing market. By one measure prices were up at double digit rates, says host Mary Walden. Foreclosures were down, and there were more buyers, she says. “But are there any negatives you and others see in the housing recovery?” Walden asks her husband, N.C. State University economist Mike Walden.
Mike Walden: Mary, many economists have said that we need a great housing recovery to really have a good economy. And as you know there are many pluses right now in the housing market, but if you look hard there are also some cautions. Now, on the surface, the ability of a household to buy a home looks very good. The average mortgage-payment-to-income ratio is at 20 percent, below the 24 percent average. But this assumes that the household is making a standard down payment, and many first-time buyers still can’t do that. They’ve not accumulated money for a down payment, and also regulations have tightened on making very low down payments. Many young households, for example, are delaying having a family, and they’re opting to rent. And then of course the employment market is still not back where we were. So builders are being very cautious about ramping up supplies. So we do need to have some improvements in the housing market, I think, for it to be very robust. And if we do get a robust housing market, that’s going to be very, very good news for the overall economy.Category: Economic Perspective