Housing prices are falling around the country, but many Americans still cannot afford to buy a home. In fact, in an earlier post, I cited a study that found that 60 percent of Americans plan not to buy a home in the next two years.

"In many parts of the country, housing increases have outpaced wage growth for almost a decade. Census data released in 2006 revealed that between 2000 and 2005, the burden of housing costs grew sharply," according to a Bankrate.com article.

The article cites a recent study done by the Center for Housing Policy (CHP) called "Paycheck to Paycheck: Wages and the Cost of Housing in America." The study looked at 210 U.S. metropolitan areas and the wages earned by workers in 60 different occupations.

"Registered nurses, who typically have high salaries, were unable to purchase a median-priced home in 108 of the markets," according to the article. "The study also found that retail salespeople and food-preparation workers couldn't afford to rent a two-bedroom apartment in any of the markets. It based affordability on the metrics that a family or person should not spend more than 30% of household income on rent and utilities while homeowners should not spend more than 28% of their income on the mortgage, taxes and insurance."

Also according to the article, "The Housing Affordability Index measures the cost of housing against median family income. The National Association of Realtors, or NAR, which calculates the index, considers that the typical family makes enough money to buy the typical used home, assuming a 20% down payment and a traditional 30-year mortgage.

"In 2000, the NAR pegged the index at 129.2, meaning the typical family had 129% of the income necessary to pay for the typical used house. That figure dropped to 104.9 in June 2007, even though the 2000 median family income of $50,732 rose to $59,157 during the period.

"That's because the median price of a home in 2000 was $139,000, but by June 2007 prices peaked at a whopping $229,200. In those seven years, the median price of homes increased 64.9%, while median incomes rose just 16.6%."

Labels: Housing

The nation's recent housing bubble--which is now collapsing as a recession looms--may have had consequences beyond strictly financial ones. The 4,265,996 babies born in 2006--the most babies born in a year since 1961--may have been part of a baby boom brought on by the housing boom, according to an article in the New York Times.

"Social scientists have long traced a connection between housing and fertility," according to the New York Times, and some of these social scientists are theorizing that the housing bubble led to a mini baby boom.

"For the first time in 35 years, America’s total fertility rate—the estimated number of children a woman will have in her lifetime—reached 2.1, the theoretical level required to maintain the country’s population, according to recent data from the National Center for Health Statistics," the article said.

"In the wide-open mortgage climate early this decade, creative loan products allowed more people than ever to buy homes, often a precursor to having children," the article said. Once they owned homes, then, many probably felt they were stable and responsible financially. Owning a home also probably gave a lot of people the feeling that they had enough space to raise kids. And in 2006, the housing boom baby boom was born.

This mini baby boom could mean a lot of things. For one, the class of college students starting in the fall of 2024 is sure to be quite competitive.

In addition, this mini baby boom could be a boon to the original baby boomers who, in addition to having more grandchildren to spoil, now have a lot more people who could help pay for their retirement.

While the oldest of the original baby boomers can now collect Social Security and retire, the youngest baby boomers still have 21 years until they hit age 65--the traditional retirement age--and many people plan to work past age 65 in order to be able to sock away enough money to retire comfortably. Thus, these housing boom baby boomers will be in the work force early enough to contribute to Social Security in time for the original baby boomers to benefit.

Labels: Baby Boomers, Housing