"Affordable Housing"

Housing is more affordable now than it was twenty years ago, according to the New York Times article: Twenty Years Later, Buying a House Is Less of a Bite : "Despite a widespread sense that real estate has never been more expensive, families in the vast majority of the country can still buy a house for a smaller share of their income than they could have a generation ago."

Try this exercise: Walk into any car dealership and tell them you can not afford to buy a new car. They will find a way to make it "affordable" by stretching out the payments from 3 to 5 to even 7 years if they have to so that you can make the monthly payment. Does that really make it affordable? "People aren't really shopping prices," said Bill Trask, a broker at Coldwell Banker Friends and Neighbors Realty in suburban Portland. "They're shopping payments."

The idea presented is that loose lending standards make something more affordable. Of course that is preposterous. If someone can not afford to save a down payment, perhaps they can not really afford to make those housing payment either. Interest rates can and do fluctuate, and regardless of what anyone says, real estate prices do not always go up. Can the average person really "afford" to pay 30-50% too much for a house or condo? Can you afford to lose $100,000 on that $400,000 condo if the price drops next year?

In stark contrast to the NY Times article above, check out the WSJ article Housing Affordability Hits 14-Year Low : "Housing affordability in October sank to its lowest levels since 1991, according to the National Association of Realtors' Affordability Index."

If the biggest expense that most people have (housing) is so damn affordable why is consumer debt going through the roof? I guess it's a good thing that housing is affordable because it sure seems no one can afford to pay for anything else. The bottom line is real wages are declining, bankruptcies are skyrocketing, consumer debt is soaring, and equity extraction from homes is used for routine consumption. This is happening in a "recovery". Something does not add up. In fact many things do not add up. Topping off the list is the idea that housing is now affordable.

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