How Housing Affordability Can Falter Even as House Prices Decline The assumption that lower home prices improves the affordability of houses ignores two critical inputs: interest rates and income.
That the U.S. housing market is still in a post-bubble slump is no secret, as revealed by this chart courtesy of streettalklive.com: note that despite unprecedented intervention, including the complete socialization of the U.S. mortgage market (99% of all mortgages are guaranteed by the Federal government) and the socialization of subprime market for poor credit risks (3% down and easy credit from FHA), this chart punctures the happy-talk illusions of a rebound in housing.
Income growth:
source: http://www.oftwominds.com/blogmar12/housing-affordability3-12.html
