A recent article in the Wall Street Journal, reports that a study by Andrew Davidson & Co. shows that “Home prices and mortgage rates have made monthly mortgage payments lower than at any time in the past decade. But housing isn’t any more affordable than it was five years ago, during the go-go lending days, after factoring in down payment requirements and other financing terms…”
The article goes on to quote the author’s explanation for why the current record-low interest rates and reduced prices are not leading to a home sales bonanza: “At the peak of the housing bubble, loan payments were the only cost that borrowers had to consider given the ability to take out no-money-down loans. But today, loan payments constitute roughly 50% of the total cost of ownership ‘and are rather modest by historical standards,’ the paper says. ‘This explains why the record-low interest rates do not impress borrowers and do not propel home prices up.’”
On the other hand, on the AirTalk radio show carried by KPCC-FM, a public radio affiliate, two “experts” reach the opposite conclusion. Stuart Gabriel, a noted LA area economist and director of the Richard S. Ziman Center for Real Estate at UCLA, and Andrew LePage, an analyst with Dataquick Information Systems, believe that the market has bottomed out and is now trending upward.
I am not convinced.