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Earlier this month we learned that the inventory of homes for sale had reached the highest level in 19 years, and housing affordability was at a 14-year low. This week there is yet another article in the Wall Street Journal about housing affordability.

According to a study prepared by Moody’s Economy.com for the Wall Street Journal, housing affordability fell almost 9% in the third quarter from a year ago. In some markets, affordability declined by more than 20%. On a percentage basis you have to go back 25 years to find a decline in affordability as significant as this.

Earlier I read that there is not one county in the entire United States where a person working full time, earning minimum wages, can afford to rent a one-bedroom apartment. But it is not only lower income families that are having accommodation problems: even middle to upper income families find it difficult to move up. In some areas of the country, such as New York, Los Angeles, San Diego, San Francisco and Miami, affordability has declined to levels not seen since the ‘80s.

According to the Mortgage Bankers Association, mortgage applications are at their lowest level in almost a year. Also, home ownership has started declining from the record 69.4% reached in the second quarter of 2004 and now stands at 68.7%. It may not be a large decline, yet, but it certainly signals the effect that rising house prices and rising mortgage rates are having on homebuyers.

I do not believe this is a trivial matter, which is why I have dedicated so much time to writing about the real estate market. As the real estate market goes, so goes the economy and the stock market. The only thing that could keep the US on life support a little longer is another round of interest rate reductions, but this time it could hurt the dollar, and that would mean higher gasoline prices again, so it’s a double-edged sword.

Courtesy of: http://www.paulvaneeden.com/