This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
11/15/2005
Housing Affordability
According to the NAR (National Association of Realtors) the average price of a starter home has rose $23, 500 nationally in the past year. To even apply for a mortgage your income needs to exceed $47,952 a year, but the median income of a typical first-time buyer is only $32,781. That does not include the 10% down payment. To add to the problem the interest rates have also gone up from 5.53 percent to 6.3 percent. This may not sound that bad, but it adds about $100 a month to a $999 mortgage payment. I am not happy about this at all, because my husband is preparing to be a high school teacher and we all know what their income is like.
Subscribe to:
Post Comments (Atom)
1 comment:
Ooh! You all fell for a reporter's trick.
The article quoted the average price.
Yet you are all talking about your income, which is unlikely to ever be average.
The reason is that both house prices and incomes can't fall below zero, but they can go as high as infinity. This creates a distribution of values that is not symmetric, and is in fact skewed to the right. In this sort of distribution, the average always exceeds the median.
In order to make a useful comparison, you need to compare average income (which is higher than median income) to average home price, or median income to median home price (which is lower than the average price).
If you do, the problem goes away. But, there is a new problem in that the reporter no longer has anything to write about.
Post a Comment