Niagara Gazette

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November 21, 2012

Five economic trends to be thankful for

(Continued)

— Housing is dramatically more affordable. People often speak as if higher home prices are an unambiguously good thing, but that can be misleading. Sure, a retiree looking to sell off a large house and live in a small condo instead benefits from high home prices. But most everyone else is either better off when buying a home is more affordable rather than less. But to put some more concrete numbers on this idea, I made a simple model to look at what a typical American family would actually have to pay to buy a house over time. Assuming the person took out a 30-year fixed rate mortgage at the prevailing rate in an amount 80 percent of the median home sales price across the country (meaning that they put 20 percent down, allowing them access to low, "conforming" mortgage rates). In the spring of 2006, that typical American home buyer would have faced a monthly mortgage payment of $1,247 a month, or a whopping 41 percent of the monthly average wages of private sector workers. But in the six years since then, home prices have fallen, so have mortgage rates, and wages have risen with inflation. Add it all up, and in the spring of 2012 that median American house would require a mortgage payment of only $889 a month, which is 26 percent of the average private sector employee's pay. For workers just starting out, young families, or those looking to buy a bigger place, that is hard to beat.

Those five trends add up to a delicious mix.

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