The near-collapse of the housing industry has actually had one beneficial effect: It has increased affordability for those with the ability to consider making such a high-ticket purchase. The National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) showed that 72.3% of all new and existing homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000. The large inventory of homes continues to push prices down, and that combined with continued low interest rates has made housing more affordable than it has been for several years. In fact, Michigan is one of the most affordable housing markets in the nation. Several Michigan cities ranked highly in the survey, including Detroit/Dearborn, Grand Rapids, Bay City and Lansing.
Home prices rose in 91 U.S. cities in the first quarter as states hard hit by foreclosures began to recover and a tax credit cut the number of properties for sale. Cities with the most foreclosures a year earlier had the biggest price increases as a tax credit of as much as $8,000 boosted demand and drove the supply of unsold homes to a four- year low in January.
The National Association of Realtors has lowered expectations for sales of U.S. resale homes in 2010. Only time will tell how the residential real estate market will be affected by the expiration of the home buyer tax credits. Consumers remain unsure about the direction of the housing market, but are optimistic about real estate values
Lawrence Yun, the national group's chief economist, said favorable affordability conditions have been working with the tax credit. "Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales," he said. "Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing."