April 11th, 2009 8:07 PM by Lehel Szucs
· A silver lining in the current housing market is the increase in affordability. According to the Center for Housing Policy, between 1996 and 2006, all major categories of homeowner expenses increased faster than incomes. Mortgage payments increased 46 percent; utilities, 43 percent; property taxes, 66 percent; and property insurance, 83 percent. By contrast, homeowner incomes increased by 36.3 percent. However, the decline in home prices is enabling home buyers, especially first-time buyers, the ability to purchase homes at favorable prices. The NATIONAL ASSOCIATION OF REALTORS®’ (NAR) affordability index rose 13.6 percent in January to 166.8, the highest since tracking began in 1970. The CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) First-time Buyer Housing Affordability Index stood at 59 percent in the fourth quarter of 2008, meaning that more than half of California households could afford to purchase an entry-level home in the state.
· A change in tax code provides homeowners who sell their homes through short sales some added relief. As of 2007, if the mortgage on a foreclosed home is higher than the proceeds realized on the property, the debt is forgiven, and is not considered taxable income. Prior to 2007, the difference between the sales price and the amount the lender accepted was considered taxable income to the seller. · Underlying strength in the U.S. economy, record-low interest rates, and the expansion of mortgage credit have led to a surge in homeownership since 2000. After averaging 1.15 million per year between 1995 and 2000, the Joint Center for Housing Studies reports household growth rose to 1.37 million annually between 2000 and 2006.