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Home : Articles : HOW STRONG IS THE HOUSING MARKET WHERE YOU LIVE?

BUSINESSWEEK ONLINE
Cover Story
April 21, 2006

HOW STRONG IS THE HOUSING MARKET WHERE YOU LIVE?

Housing prices have repeatedly defied forecasts of a bust, but the market is finally showing signs of cooling. How can you tell if the area where you live is vulnerable to a downturn?

By exploring this exclusive interactive table. It contains 13 key data points on each of 30 major metro areas. See how much home prices have risen, how prices stack up against local incomes, or how expensive it is to buy a house vs. rent a similar property. And more. Each column can be sorted from highest to lowest values to see how the various metro areas rank by that measure Column headings are defined below.

Get it here: http://bwnt.businessweek.com/housing/2006/index.asp

DEFINITIONS:

CHANGE IN HOUSE PRICES

Change in average home prices from the fourth quarter of 2000 to the fourth quarter of 2005.
Data: Office of Federal Housing Enterprise Oversight.

HOUSING OPPORTUNITY INDEX
The percentage of nex and existing homes sold in the fourth quarter of 2005 that were affordable by a family earning the metro area’s median income.
Data: National Association of Home Builders.

BW'S LUXURY HOUSING AFFORDABILITY INDEX
BusinessWeek's own index of the affordability of luxury homes. It measures whether a family whose income is at the 90th percentile of area incomes (90% of families earn less; 10% earn more) can afford a house whose price is at the 90th percentile of all house prices in that area. It takes into account mortgage rates. As of fourth quarter, 2005.
Data: Fidelity National Inc., Federal Housing Finance Board, Dept. of Housing & Urban Development.

CHANGE IN EMPLOYMENT
Percentage change in annual average nonfarm employment.
Data: Bureau of Labor Statistics.

CHANGE IN SINGLE-FAMILY HOUSE CONSTRUCTION PERMITS
Percentage change in the number of permits issued for construction of single-family homes.
Data: National Association of Home Builders.

COST OF RENTING IN PROPORTION TO COST OF OWNING
Monthly cost of renting a house as a percentage of the monthly cost of owning a similar house, including mortgage payments and maintenance. As of 2005.
Data: Torto Wheaton Research, a unit of CB Richard Ellis.

HOUSING CYCLE BAROMETER AFFORDABILITY
A measure of the affordability of median-price homes by median-income families that amortizes the down payment over seven years, the typical period people live in a house. As of December, 2005.
Data: John Burns Real Estate Consulting Inc.

HOMES BOUGHT AS INVESTMENTS
Percentage of homes purchased with a mortgage that are bought as investment properties, as noted on loan documents, in 2005.
Data: LoanPerformance.

PURCHASE LOANS REQUIRING INTEREST ONLY
Percentage of homes purchased with a mortgage requiring interest payments only, as noted on loan documents, in 2005.
Data: LoanPerformance.

PURCHASE LOANS PERMITTING NEGATIVE AMORTIZATION
Percentage of homes purchased with a mortgage allowing negative amortization, as noted on loan documents, in 2005. Interest that is owed but not paid is added to the loan’s principal.
Data: LoanPerformance.

HOUSE PRICES IN AMERICA VALUATION
Percentage of overvaluation (positive numbers) or undervaluation (negative numbers) based on a formula that takes into account house prices, interest rates, household incomes, population densities, and historical price patterns.
Data: Global Insight Inc. and National City Corp.

HSBC HOMEPULSE VALUATION
Percentage of overvaluation (positive numbers) or undervaluation (negative numbers). It is the average of three valuation measures: homeowner costs vs. incomes; homeowner costs vs. rent (in comparison to the 30-year average) and expected future homeowner costs vs. expected future rents (in comparison to the 30-year average).
Data: HSBC Securities (USA) Inc.

MARKET RISK INDEX
The probability of a house price decline over the next two years. A Risk Index score of 598 means there is a 59.8% probability that house prices in that market will fall over the next two years.
Data: PMI Mortgage Insurance Co.

 

 


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