Our starting point will be an article on CNN Money that was posted recently on May 18, 2006 : Most Affordable housing markets
In Los Angeles, the least affordable big metro area, only 1.9 percent of the homes sold were within the reach of families earning a median income for the city of $56,200.
They have a table which I urge you to look up.
Now, take a look at this press release by the California Association of Realtors : Housing affordability at 23 percent.
The percentage of first-time buyers in California able to afford a median-priced home stood at 23 percent in the second quarter of 2006, compared with 30 percent for the same period a year ago, according to a newly developed index released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
Mysteriously, Los Angeles affordability has jumped to 19%, ten times from two months ago.
Wow! most of LA seems to have hit the lottery!
Hmmmm.... could it be that this "newly developed index" fudges with the statistics?
Yep!
Ironically, they are so stupid that they give you the answer:
C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household’s income.
A little later they list the monthly payment for the median home, and the minimum monthly income needed to qualify.
Simple calculation:
So now they expect people to shell out 40% of their gross income instead of 30? Of course, the index jumped!
However, that doesn't change economic reality.
Of course, one would never expect a self-serving group like CAR to play hard and loose with the facts!
And, journalistic rags like the San Luis Obispo Tribune and Whittier Daily News publish this steaming pile of dogshit.
1 comment:
Those who know me know that I consider 40% to be a preposterous amount of gross income to be spending on housing.
I spend 30% and that's already too much. Ideally, I would spend no more than 20%.
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