Data affirms that houses are affordable

Moody’s Analytics announced data this morning that indicates that homes in the United States are the most affordable they have been since before the massive real estate bubble.  Specifically, the data compare median home prices to median household income.

Clearly the lower the ratio the better.  In September the ratio hit a level of 1.6 as compared to the height of the bubble in late 2005 when the ratio was 2.3.  That figure of 1.6 compares to an average ratio of 1.9 for the span of years for which the data have been gathered.

Analysis: Recently I have been writing about the real estate market in the United States more.  I have especially written about the poor supply and demand fundamentals of the real estate market.  Frankly there is no good news.  While today’s news is “positive” it really just affirms that things are miserable out there if you own real estate.  But that is a big “if.”

You see all of making money as an investor boils down to four simple words: buy low, sell high.  The supply of houses is high, the demand is low.  Incomes are rising.  It is a buyers market.  If there is any market where fundamentals favor the buyer it is real estate.  Let me repeat that: the bull market is in real estate.

Stocks are about fairly valued.  The bond markets are waiting for interest rates to rise and prices to fall.  Gold is at its absolute peak and will likely collapse as soon as the Chinese economic bubble bursts, taking other commodities with it, too.

Today’s data affirm that if you can afford it and you can find financing for it – real estate is a good investment.

Importance grade: 4; while it may seem that the data today is terribly important it isn’t.  It merely affirms what everyone has known for the last 3 years – it sucks to own much real estate.

Jason