Homeownership Getting More Affordable

Long gone are the days of the "bubble" in the real estate market.  We're now beginning to see signs that we've reached the bottom, as falling real estate sales have created more affordable housing.  Prices are more in line with median incomes around the country, providing a strong signal that the end of the slump may be in sight.

At the peak of the housing bubble, hot properties were priced well into the stratosphere across the country.  Buying a new home in many of these top markets was deemed impossible for people with salaries around the median income levels.  Affordable housing became almost an oxymoron as the market reached dizzying heights.

What goes up must come down in any economic system, and those increasing home values soon became a distant memory.  For the last few years, home prices have dropped across the nation, suddenly becoming affordable once again for many Americans.

Drop toward median income levels

Plummeting home prices were reflected in the latest quarterly survey by the National Association of Realtors.  Existing home sales fell in 32 states from second quarter levels.  In addition, 120 metro areas experienced declines in existing single-family home prices.

The decline in values may be attributed to the large number of distress sales, which include foreclosures and short sales.  These types of trades accounted for nearly 40 percent of the transactions, and dragged the national median price for a single-family home down to $200,500, which is 9 percent lower than it was during the third quarter of 2007. 

This cloud appears to have a silver lining, however:  Housing markets are becoming more and more affordable for people with median incomes.

Toledo tells the tale

Toledo, Ohio is the poster child for affordable home prices.  The National Association of Home Builders noted that 84.6 percent of homes in the area could fit into the budget of a family with a median income.  A number of other cities across Ohio have indicated similar trends. 

Are these price realignments indicative of a larger economic trend?  During the last decade, the country has endured a growing chasm between the upper and lower classes, especially in real estate. 

The housing slump and subprime mortgage crisis has changed the financial playing field.  Credit is no longer easily available.  Mortgage banks have reverted back to substantial down payments and solid credit histories as criteria for homeownership.  You can get a loan, but you'll need to prove yourself creditworthy.

As a result, increasing home values that defied explanation are ancient history.  A more accurate valuation is now occurring, and prices are more aligned with median incomes. These current trends in the housing market are signs that sanity and common sense are returning, and hopefully, the health of the economy will soon follow.  If a corner has indeed been turned, we can only hope that the lessons of the past won't be revisited any time in the future.