[Alibio-devel] NUMBER ONE Success System

[Tommy Lee]

http://www.noss123.com/

Housing affordability measures

   - The *price to income ratio* is the basic affordability measure for
   housing in a given area. It is generally the ratio of median house prices to
   median familial disposable incomes, expressed as a percentage or as years of
   income. It is sometimes compiled separately for first time buyers and termed
   *attainability*. This ratio, applied to individuals, is a basic
   component of mortgage lending decisions. According to a back-of-the-envelope
   calculation by Goldman Sachs economists, a comparison of median home prices
   to median household income suggests that U.S. housing in 2005 is
   overvalued by 10%. "However, this estimate is based on an average mortgage
   rate of about 6%, and we expect rates to rise," the firm's economics team
   wrote in a recent report. According to Goldman's figures, a
   one-percentage-point rise in mortgage rates would reduce the fair value of
   home prices by 8%.
   - The *deposit to income ratio* is the minimum required downpayment
   for a typical mortgage [*specify*], expressed in months or years of
   income. It is especially important for first-time buyers without existing
   home equity; if the downpayment becomes too high then those buyers may find
   themselves "priced out" of the market. For example, as of 2004 this ratio
   was equal to one year of income in the UK (Nottingham Trent University
   paper).
   Another variant is what the National Association of Realtors calls the
   "housing affordability index" in its publications. [6]. (The NAR's
   methodology was criticized by some analysts as it does not account for
   inflation [7]. Other analysts, however, consider the measure
   appropriate, because both the income and housing cost data is expressed in
   terms that include inflation and, all things being equal, the index
   implicitly includes inflation[*citation needed*]). In either case, the
   usefulness of this ratio in identifying a bubble is debatable; while
   downpayments normally increase with house valuations, bank lending becomes
   increasingly lax during a bubble and mortgages are offered to borrowers who
   would not normally qualify for them (see Housing debt measures, below).
   - The *Affordability Index* measures the ratio of the actual monthly
   cost of the mortgage to take-home income. It is used more in the United
   Kingdom where nearly all mortgages are variable and pegged to bank lending
   rates. It offers a much more realistic measure of the ability of households
   to afford housing than the crude price to income ratio. However it is more
   difficult to calculate, and hence the price to income ratio is still more
   commonly used by pundits.
   - The *Median Multiple* measures the ratio of the median house price
   to the median annual household income. This measure has historically hovered
   around a value of 3.0 or less, but in recent years has risen
   dramatically, especially in markets with severe public policy constraints on
   land and development. The Demographia International Housing
   Affordability Survey uses the Median Multiple in its 6-nation report.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://bioinformatics.org/pipermail/alibio-devel/attachments/20070822/035b244b/attachment.html