“Yeah their payment is changing but relative to their incomes they are not living any different. The increased payment is actually representative of a smaller amount than what they initially purchased their first place. They were stretching more at that time than they are now.”
You couldn’t be more incorrect about what percentage of their income people are paying in order to debt service these prices.
At the top of Rich’s homepage he actually has an update to a piece he wrote a couple years back about rates, prices and payments. Unfortunately I was unable to find his original article ’cause it was a doozy.
Rich explains that during the same period when interests rates dropped to their currently low levels, the percentage of income people were paying actually increased by 75%. That means that even though their purchasing power had increased as a result of the lower interest rates, the prices were increasing at an even faster rate, wiping out any savings they would have had.
And logically speaking, that would make sense. How else could a region that’s had maybe 15% growth in wages since 1996 possibly support a 300% increase in home prices, if not for it coming in the form of some buyers paying a larger share of their income? Your assertion that people are actually paying less not only flunks a cursory review of the statistics on wages vs. pricing, it flunks the reality test as demonstrated by the explosion of the NOD/NOT rates as well as the most basic of analyses using simple deductive logic. +15% in income and -15% in interest rates will not support 300% increases in pricing.
Think about it and let us know if you can refute that simple line of reasoning.
Most recent buyers are paying MORE of their income towards their housing that they were prior to 2001, not less. The only exceptions would be people who purchased prior to 2001 and didn’t withdraw equity when they refinanced, which to be sure includes some people, but not the majority of recent buyers. I agree that anyone who has a 50% equity stake in their home is in no danger of losing their home, but that doesn’t mean their equity is safe.