Less than 5 years ago, an average home was affordable on an average income. Now home costs have soared to the point where it requires twice the income to buy an average-cost home. Why has this happened?
2007-02-08 17:46:54 · 5 answers · asked by Dan S 1 in Business & Finance ➔ Renting & Real Estate
There are many reasons. most are based on supply and demand. First, Stocks and bonds dropped after 9/11 thus leaving investers searching for more stable investments. They put thier money in real estate because it is generally the safest investment. when they bought up the extra houses, everyone else had to pay more to beat out the other guy for the remaining houses. This shot house prices up.
In addition, we had influxes of immigrants. Wars in Europe and the middle east, poverty in Mexico and south America, and growth of money in Asia led to more people with the means or reason to come here. They took up much of the housing market as well.
A third reason is that lenders made it easier to get loans, and for higher amounts. Allowing people to get 100% loans let more people compete for the houses that were available. People also started to spend at thier maximum limits instead of the lower end of thier budgets. This again drove house prices up.
Finally, and the reason that effects the lower end of housing is our government. They realized that no one complains about fees, so they have raised or created new fees for builders to build on properties. In some places in southern California fees to the city and state are around $150,000. By the time you add supply costs, worker's wages, and a profit. New houses are well out of the average Americans reach,
2007-02-08 18:11:43 · answer #1 · answered by Ron B 3 · 1⤊ 0⤋
what do you mean average? and what is affordable? you really cant compare the cost of houses all over the US. you can buy a new 3800 sf. 6bedroom 4 1/2bath on 2 aces with a 2000sf garage out side Houston TX for under $400,000 the same outside LA would be closer to $10,000,000
2007-02-09 02:03:20 · answer #2 · answered by robert f 2 · 1⤊ 0⤋
Another reason is that interest rates have been relatively so low. With low interest rates this makes businesses more confident to borrow money. If businesses are more comfortable this allows them to spend more on their employees in the upper levels of management. Those people have a higher levels of expendible income and so real estate agents figure well we can sell houses for more.
2007-02-09 01:59:48 · answer #3 · answered by cehelp 5 · 0⤊ 0⤋
Inflation. In USA, you can't really complain. You should see what homes cost in places like the UK, New Zealand or Australia. YOu would be thankful that homes are still affordable in USA.
2007-02-09 01:54:02 · answer #4 · answered by Muga Wa Kabbz 5 · 0⤊ 0⤋
not only in usa, i think everywhere else
2007-02-09 02:05:52 · answer #5 · answered by justsexy 3 · 0⤊ 0⤋