Math Doesn't Add Up
There's an encouraging story in the St. Petersburg Times today, written by good ol' James Thorner, that essentially says that 60-percent of people who currently live in Pinellas County can afford to buy a median priced home.
The paper reports that our median family income is now $56,500 and that the median home price is $167,000. If you take the standard home expense of not exceeding 3.2 times income, 60 percent of folks here can afford the median home.
Not so fast! Not so fast.
Granted, the median family income has gone up to $56,500 based on data I found on the internet this morning. But where did that $167,000 median priced home come from?
I grant you that home prices have been falling for the past couple of years, but in Pinellas County the median has not reached $167,000 just yet.
According to the Pinellas Association of Realtors, the median price for a single family home in Pinellas County in April was $178,000. In March it was $180,00. It was $179,000 in February and $176,500 in January, 2008. In fact, the last time we had a median price approaching $167,000 was in February, 2003 when the median price was $168,000 -- and that was over five years ago!
Unless I'm missing something, it somehow doesn't seem right for the authors of this study to use up-to-the-minute (and presumably higher) income data with five-year-old (and presumably lower) pricing data, and then jump to the conclusion that housing is somehow very affordable in Pinellas County for 60 percent of today's residents and prospective buyers.
Does that seem right to you? Doesn't seem right to me.
Let's take a look at the source for this information. Sure, it was reported in the Times, but where did they get it?
Ahhhhh ... the source for this data is a survey conducted by the National Association of Homebuilders (NAHB) and Wells Fargo. Last time I checked, the NAHB was a trade organization whose role was to help promote home ownership and represent the interests of home builders. Let's see, do you think they might have a vested interest in making things look rosy? And Wells Fargo is one of the largest mortgage bankers in the country. Do you think their interest in writing new mortgages might lead them to co-sponsor extra-rosy survey conclusions?
Sometimes I think you have to be a little suspicious of the source for data. Seems like I learned that when I was a student journalist at the University of Florida back in the 1960's.
Here's the other thing that isn't being discussed in the story. The simple fact is that the total cost of owning a home is not being used. Total home costs consist of principal, interest, taxes and insurance (PITI). Looks to me like NAHB and Wells Fargo only considered the costs associated with the principal and the interest for the mortgage. I'll bet they did not consider Florida's still outrageous property taxes and equally outrageous insurance costs when calculating that 60-percent of us could afford the median priced home.
I think they should have. After all, taxes and insurance are part of every monthly house payment. Prospective home buyers sure do include those costs in their calculations of affordability. Find me a real estate agent who has not been asked about taxes and insurance costs related to a home purchase in the last few years. Find one. I dare ya. I double-dare ya!
Look, here's the reality of the situation. If you take that $56,500 average household income and project 3.2-times income, the average household can afford a house costing $180,800. But then you start reducing that price due to taxes and insurance. When you do that, housing affordibility starts to drop pretty far, pretty fast and a lot of people have to start buying property below the median price.
I wonder how many of those at NAHB and Wells Fargo who sponsored this report have shopped for a house priced below the median in St. Petersburg. It can be pretty discouraging when you see how little your money buys around here. To me, we won't really have a fully recovered real estate market until the family earning the average income can afford a decent home in a nice, safe neighborhood. And if you're shopping below the median price today, finding that can be pretty darn discouraging.
So, I guess one of two things has to happen. Either house prices have to keep coming down, or local employers need to start paying better. Which do you think will happen first?
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
The paper reports that our median family income is now $56,500 and that the median home price is $167,000. If you take the standard home expense of not exceeding 3.2 times income, 60 percent of folks here can afford the median home.
Not so fast! Not so fast.
Granted, the median family income has gone up to $56,500 based on data I found on the internet this morning. But where did that $167,000 median priced home come from?
I grant you that home prices have been falling for the past couple of years, but in Pinellas County the median has not reached $167,000 just yet.
According to the Pinellas Association of Realtors, the median price for a single family home in Pinellas County in April was $178,000. In March it was $180,00. It was $179,000 in February and $176,500 in January, 2008. In fact, the last time we had a median price approaching $167,000 was in February, 2003 when the median price was $168,000 -- and that was over five years ago!
Unless I'm missing something, it somehow doesn't seem right for the authors of this study to use up-to-the-minute (and presumably higher) income data with five-year-old (and presumably lower) pricing data, and then jump to the conclusion that housing is somehow very affordable in Pinellas County for 60 percent of today's residents and prospective buyers.
Does that seem right to you? Doesn't seem right to me.
Let's take a look at the source for this information. Sure, it was reported in the Times, but where did they get it?
Ahhhhh ... the source for this data is a survey conducted by the National Association of Homebuilders (NAHB) and Wells Fargo. Last time I checked, the NAHB was a trade organization whose role was to help promote home ownership and represent the interests of home builders. Let's see, do you think they might have a vested interest in making things look rosy? And Wells Fargo is one of the largest mortgage bankers in the country. Do you think their interest in writing new mortgages might lead them to co-sponsor extra-rosy survey conclusions?
Sometimes I think you have to be a little suspicious of the source for data. Seems like I learned that when I was a student journalist at the University of Florida back in the 1960's.
Here's the other thing that isn't being discussed in the story. The simple fact is that the total cost of owning a home is not being used. Total home costs consist of principal, interest, taxes and insurance (PITI). Looks to me like NAHB and Wells Fargo only considered the costs associated with the principal and the interest for the mortgage. I'll bet they did not consider Florida's still outrageous property taxes and equally outrageous insurance costs when calculating that 60-percent of us could afford the median priced home.
I think they should have. After all, taxes and insurance are part of every monthly house payment. Prospective home buyers sure do include those costs in their calculations of affordability. Find me a real estate agent who has not been asked about taxes and insurance costs related to a home purchase in the last few years. Find one. I dare ya. I double-dare ya!
Look, here's the reality of the situation. If you take that $56,500 average household income and project 3.2-times income, the average household can afford a house costing $180,800. But then you start reducing that price due to taxes and insurance. When you do that, housing affordibility starts to drop pretty far, pretty fast and a lot of people have to start buying property below the median price.
I wonder how many of those at NAHB and Wells Fargo who sponsored this report have shopped for a house priced below the median in St. Petersburg. It can be pretty discouraging when you see how little your money buys around here. To me, we won't really have a fully recovered real estate market until the family earning the average income can afford a decent home in a nice, safe neighborhood. And if you're shopping below the median price today, finding that can be pretty darn discouraging.
So, I guess one of two things has to happen. Either house prices have to keep coming down, or local employers need to start paying better. Which do you think will happen first?
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 4:20 AM
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