Income lags housing

Michigan Foreclosure & Real Estate News

MI Foreclosure Article Summary:  One theory behind the rise of Michigan foreclosures, is that fact that the rate of income rising has not compared to the rate at which housing was increasing during the real estate market boom. However were not fiscally, or realistically able to purchase at inflated rates, and the aftermath led many homeowners through the Michigan foreclosure process.  Income has grown at similar rates to inflation while real estate grew at almost 145 percent during a 15 year period.
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News Staff Reporter and The Associated Press

The average price of a home grew at more than twice the rate of household income in both Washtenaw and Livingston

counties since 1990, a review of new Census data by The News shows.

The growing separation between the two figures mirrors a trend across the nation, where homeowners have faced a growing gap between their incomes and the cost of their homes.

The widening gap in all but a handful of the nation's 500 largest cities helped make the recent boom in housing prices unsustainable, analysts say. The rising prices were fueled largely by low interest rates and risky borrowing, rather than increasing incomes.

"We had an artificial economy,'' said Brad Geisen, founder of Foreclosure.com, a Web site that lists foreclosure properties. "There was all this wealth created in real estate, and it wasn't really created.''

Nationally, the median household income grew by about 60 percent from 1990 to 2006, roughly matching inflation. At the same time, the median home value - the point at which half cost more and half cost less -- more than doubled, to $185,200.

The trends held in Washtenaw and Livingston counties as well.

In Washtenaw County, the median household income climbed from $36,307 in 1990 to $56,817 in 2006, Census figures show. That's a gain of 56.5 percent.

At the same time, however, the median value of an owner-occupied home rose from $96,000 in 1990 to $235,900 in 2006. That's a gain of 145.7 percent.

In Livingston County, the median household income jumped from $45,439 in 1990 to $70,629 in 2000, Census figures show. That's a gain of 55.4 percent.

At the same time, the

median value of an owner-occupied home rose from $97,300 in 1990 to $233,600 in 2006, an increase of 140.1 percent.

However, both the median household income and the median value of an owner-occupied home in Livingston County dipped in 2006 as compared to 2005.

The gap between incomes and home values was even bigger in many cities.

For example, incomes in Miami roughly kept pace with inflation -- meaning they were effectively stagnant -- while the median home value quadrupled, to $315,900. In places such as Bend, Ore., and North Las Vegas, Nev., incomes about doubled, but home values increased fivefold.

The Census Bureau today released 2006 housing data for every state, county, metro

area and city with a population of at least 65,000.

Income data were released last month.

Together, the figures provide a snapshot of the nation's economy just as housing prices were peaking in many areas. Since then, housing prices have started to tumble in many markets, fueled by a crisis in the subprime loan market and dwindling credit even for some wealthier borrowers.

The AP compared the 2006 figures with data from the 1990 Census for the 499 cities that were included in both reports, providing an analysis of long-term trends that helped create today's housing slump.

The analysis showed that homeowners in nearly every city are spending significantly bigger shares of their incomes on housing costs. From 1990 to 2006, the share spent on housing costs increased in all but 13 of the cities examined. Nationally, the share increased from 21 percent to nearly 25 percent for homeowners with a mortgage.

In Washtenaw County, the median mortgage was $878 in 1990. It was $1,782 in 2006. That's a gain of 103 percent. Census figures also show that in 1990, 26.3 percent of mortgages took up 25 percent or more of a household budget. By 2006, that figure had risen to 51.7 percent.

There are similar numbers in Livingston County, where the median mortgage was $852 in 1990. That has risen 91.1 percent to $1,628 in 2006.

In 1990, 27.2 percent of mortgages took up 25 percent or more of a household income. That figure had risen to 47.5 percent in 2006.

David Jesse can be reached at djesse@annarbornews.com or 734-994-6937.

 

 

 

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