Page 43 - May-June 2018 GSE Report Flip Book

FANNIE MAE AND FREDDIE MAC MAJAYN-UAJRUYNE20210818
When viewed by location, most of today’s frothy metros are along the seacoast or in the western mountain states. To illustrate, the CoreLogic Home Price Index for the Denver metro area was about 30 percent above the pre-Great Recession peak, even after netting out inflation. In contrast, real per capita income in Denver has grown by less than that pace since 2006.
The CoreLogic Market Conditions Indicator is an early warning signal for bubbly markets. It should be used in concert with other metrics, such as a comparison of prices with local rents, to determine if values have become untethered to market fundamentals. And while it shows that the U.S. is not in a valuation bubble yet, there are many urban areas where prices appear to have become delinked to their long-term relationship with income. (The MarketPulse, Dr. Frank Nothaft, June 2018)
Housing’s affordability GAP is large and growing
In The State of the Nation’s Housing 2018, the staff of the Joint Center for Housing Studies of Harvard University wrote:
By many metrics, the housing market is on sound footing. With the economy near full employment, household incomes are increasing and boosting housing demand. On
the supply side, a decade of historically low single-family construction has left room for expansion of this important sector of the economy. Although multifamily construction appears to be slowing, vacancy rates are still low enough to support additional rentals. In fact, to the extent that growth in supply outpaces demand, a slowdown in rent growth should help to ease affordability concerns.
Indeed, the cumulative effect of strong growth in housing costs and modest gains in household incomes has left nearly half of today’s renters with cost burdens, including a quarter with severe burdens. The rising cost of homes for sale also raises down payment and closing costs, making it more difficult for individuals and families to make the transition to owning.
© 2018 by Canfield Press, LLC. All rights reserved. www.canfieldpress.com 43