The Brighter Side of Housing

Wall Street Journal (04/24/08) P. D1; Hagerty, James R.
The housing slump is making it possible for home buyers who could not afford to live close to their jobs during the housing boom to take advantage of falling home prices, though tighter lending standards and the possibility of additional price declines have made some buyers hesitant. Huge inventories of unsold homes are putting downward pressure on prices, with the Wall Street Journal's most recent quarterly housing-market survey of 28 metropolitan areas indicating only modest declines in supply. Florida reports the largest housing inventory, with enough homes to last 34 months in Miami-Fort Lauderdale, 21 months in Orlando and 18 months in Tampa. These inventory levels have resulted in double-digit median-price declines in some markets, with Zillow.com reporting a 25 percent drop in Las Vegas and a 19 percent decrease in Miami and Orlando. Affordability has improved as a result, and Goldman Sachs chief U.S. economist Jan Hatzius reports that the percentage of income necessary to afford mortgage payments on a median-priced home has dropped to 20 percent from 26 percent in 2006. Hatzius notes a 15 percent decline in average home prices nationwide since the 2006 second quarter, predicting that prices will stabilize in late 2009 after dropping another 10 percent or more, depending on foreclosures.