You're still paying fat percentage of income for your home

Consolation: it's a bit lower than in the pre-bubble years

Because of the startlingly low interest rates (3% to 4% mortgages), Americans are devoting a lower percentage of their monthly income to servicing their mortgages than they were in the pre-bubble years, according to information released by Zillow.com this morning (April 10). Nationally, families spent 12.6% of their income on their mortgage in the fourth quarter of last year, versus 19.9% in the pre-bubble years of 1985-1999. But in coastal California metro areas, homeowners are still shelling out fat portions of their income to service their mortgages. San Diegans, for example, were paying 25% of income in last year's fourth quarter to pay for their mortgages. Sure, that was down from 31.3% in the 1985-1999 years, but that's small consolation. In the fourth quarter, residents of San Jose were shoveling out 29.5% of income to take care of their mortgages. In San Francisco it was 28.8% and Los Angeles 29%. Those were the three highest percentages among the major 30 metro areas. Residents of Dallas, Atlanta, Detroit, Pittsburgh, Cincinnati, Cleveland, and Columbus, Ohio were all paying less than 10% of income to service mortgages in last year's fourth quarter.


One of the cities you cite with the lowest percentage of income spent on housing is Atlanta. It has been well known for its low home prices since I started being aware of such things around 1970. Yet Atlanta has grown and prospered during the intervening years. Just what is it that keeps home prices there so low? Beautiful big homes on half acre lots there used to sell for less than old, small tract houses here, in Clairemont. (It is understandable to me that home prices would be low in Detroit, Pittsburgh, Cincinnati, Cleveland and Columbus; they have lost their industries and are generally part of the so-called rust belt.) Dallas is a puzzle, too.

Visduh: Agreed. I have always been puzzled by those low prices in Atlanta. Dallas is hard to explain, too. Cincinnati is in the rust belt, yes, but it has retained some powerful employers such as Procter & Gamble and Kroger. Pittsburgh, even after losing steel, has done remarkably well. Ditto Columbus, Ohio. Best, Don Bauder

This just goes to illustrate the dangers of government meddling in markets.

Like a heroin addict, everyone is now addicted to these artificially-low interest rates that have been propped up by the creation of vast amounts of "funny money" to fuel our trillion dollar plus budget deficits. Unfortunately, when, not "if", inflation starts to take hold, the answer will be the same as it was in '79-'80... forcing interest rates higher and higher. All of these people who are hooked on 3% mortgage rates to fuel their consumer spending and to barely make it paycheck-to-paycheck are going to be wiped out. And even without any other economic factors, with just a correction in interest rates we're going to see the price of houses decline.

We tried to save ourselves from the popping of one bubble by blowing up another. We've done that a few times now in the last 15 years. It cannot continue. And like the drunk or junkie feels extreme pain when going into withdrawals, so will the American consumer when all that sweet, easy, cheap money is cut off.

jnojr: As I have hypothesized many times on these blogs, inflation is not a sure thing as long as the economy stays weak, despite all the funny money that has been created. And the Fed, politicians of both parties, and particularly Wall Street WANT the economy to stay weak. If the economy strengthens and banks begin lending, then inflation erupts. Wall Street is prospering from Main Street's pain. Best,

One word: weather.

Life is too short to spend in a freezer, an oven or a sauna.

Ponzi: Yes, weather is a factor, although Atlanta has mild (often very hot) weather and has low housing prices. But generally, the Rust Belt cities, which are cold, as well as losing their basic industries, are the ones featuring low housing prices. Centuries ago, people flooded to the colder climes because farming was better. But a small percentage of the population does farming now. The Sun Belt booms. Just look at coastal California. And excess heat also depresses housing prices: look at the Deep South. Best, Don Bauder

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