July 14, 2005, Wall Street Journal – After dropping almost steadily for three years, an important measure of housing affordability has reversed course, a development that could help put the brakes on prices in some of the nation’s hottest markets. The average initial mortgage payment for home buyers climbed to $2,338 in the first quarter from $2,060 in the fourth quarter of 2004, according to the investment bank. That suggests many home buyers are likely to have an increasingly difficult time offsetting higher home prices by taking advantage of low interest rates and new mortgage products designed to lower their monthly payments. If this trend continues, some home buyers may have to stretch more or set their sights lower. Declining affordability also could help slow the torrid home-price appreciation in the nation’s hottest home markets. The decline in affordability in some markets is supported by other recent data. In 41 out of 325 metro areas nationwide, home prices were so high during the first quarter that someone earning the median income couldn’t afford a median-priced home based on traditional lending standards, according to an analysis prepared for The Wall Street Journal by consulting firm Economy.com.
Housing Gets Even Less Affordable [Wall Street Journal]