House Values Rise, Florida Mortgage Costs Increase, Incomes Remain Steady
You don’t need to be a math major to see the problem with this equation:
High home values + Increased Florida mortgage costs + Flat Income Levels = A world of financial hurt
From 2000 to 2005, median home values surged 32 percent, fueling a consumer boom as homeowners tapped into such wealth. However, the sharp rise in home values also boosted the monthly cost to own a home by 5 percent.
At the same time, median incomes scarcely changed, posting only a 1.1 percent gain from 2004 to 2005 for example, the Census Bureau’s American Community Survey showed this week.
“The basic story is that incomes have not been going up nearly as fast as the cost of housing or the cost of any number of other products,” said John Irons, an economist at the Center for American Progress, a think tank in Washington headed up by former President Bill Clinton aide John Podesta.
“Just about anyone who owns a home or has been in the market for one in the past few years knows first-hand how home values jumped from 2000 to 2005,” said Census Bureau Director Louis Kincannon.
But housing prices over the past year have softened. This could ease up expenses for American consumers, as more and more consider a Florida home mortgage under such circumstances.
“They are willing to stretch their income at least temporarily but it’s not going to be possible indefinitely,” said William Frey, a demographer at the Brookings Institution in Washington, adding that a softening in the housing market is helping.
“In the last year housing prices have gone down. This imbalance between housing costs and income will go down for more of the country so that there won’t be these kinds of sharp divides,” Frey said.
In 2005, the average American with a mortgage spent more than 20 percent of his income on housing costs, up from 18 percent five years earlier. But now, too many are spending considerable amounts of their paychecks on a Florida mortgage loan.
“Owning a house used to be the ultimate in security and now with interest rates going up and with housing prices starting to soften, owning a house is no longer seen to be as secure as it has in the past,” Irons said.
