At the end of 2012, buyers bought homes that were three times their annual income, up from 2.6 times before the housing bubble.
The disparity is stark in high-priced areas such as San Jose, where home buyers are purchasing homes for seven times their yearly salary. Meanwhile, in Detroit, the purchase price is typically just 1.5 times a buyer’s salary.
Homes appear more affordable because low mortgage rates are painting a distorted picture of the market, said Stan Humphries, chief economist at Zillow.
They don’t “appear” more affordable, they ARE more affordable, if you can get one of these low-interest mortgages (assuming they are fixed for the term and not adjustable rate mortgages that could jump to a much higher rate which was one of the things that triggered the financial collapse). When you look at buying a house, you look at the carrying costs in terms of monthly payments, etc., not the price of the house. One place you could get in trouble is on real property taxes, depending upon how they are structured in that community. If r.p. taxes are tied to current market value, the taxes will of course increase as values go up. (In some areas, r.p. taxes are computed based on your purchase price, which means the amount of taxes you pay depends upon where the market was at when you bought.)
When my wife and I bought our first house, it was “only” $196,000. However, this was during the hyper-inflationary times of the early Eighties, and the best mortgage we could get was at 14.25% per annum, with variable interest, plus having to pay more for private mortgage insurance premiums to cover the risk of default. As I remember, we were paying something like 60% of our joint take-home pay to cover the monthly payments. Needless to say, we were very nervous the first couple of years and ate a lot of peanut butter sandwiches, until inflation calmed down and we were able to re-fi into a fixed interest loan.