From the Record:
With typical prices below $400,000, and mortgage rates south of 4 percent, homes in Bergen County in 2011 reached their most affordable levels in years — just about at the point where a majority of households can afford the typically priced home, an analysis by The Record has found.
That has opened the door to more middle-income buyers and raised the possibility that home values may begin to stabilize.
“There was a point a few years ago where you had to be pretty rich to afford a house in this area. Now, you don’t have to be so rich,” said David Blitzer, a housing economist at Standard & Poor’s.
The move toward affordability is evidence that the real-estate market, at least in Bergen County, may be reaching a turning point. Even amid a high rate of foreclosures, tight credit standards and high unemployment, the fact that more buyers can afford homes eases some of the downward price pressure in the region, and gives hope to discouraged sellers that there may be buyers out there.
“I don’t think [sellers] will have to keep dropping and dropping and dropping the price,” Blitzer said.
“If interest rates were any higher, there’s no way we would have been able to buy our house,” said Joshua Baris, a Coldwell Banker real-estate agent who bought a three-bedroom Dutch colonial in Tenafly last year. He and his wife, Hilary, locked in a rate just below 4 percent and a price — $660,000 — that was down dramatically from the earlier asking price above $800,000.
Similarly, Jaclyn and Nick Casasnovas didn’t think they’d be able to buy in northern Bergen County when they decided to move from their North Arlington apartment. But lower prices and interest rates allowed them to afford a three-bedroom house in Waldwick.
“I didn’t even think it was feasible that we could move to an area like this,” said Jaclyn Casasnovas, 30, a proposal writer for a telecommunications company and mother of a 1-year-old son.
The numbers clearly show how the market has changed. For example, a $392,000 house in a middle-tier community like Midland Park now costs about $2,347 a month in mortgage payments, property taxes and homeowners’ insurance, which consumes about 32 percent of the typical household income in the county.
That’s down from 2007, when a Midland Park house priced at $465,000, the county median, cost $3,056 in mortgage, property tax and insurance payments and consumed 41 percent of typical household incomes.
For its analysis, The Record adopted the federal government’s benchmark for affordability, assuming that housing payments (including mortgage, property taxes and insurance) total no more than 31 percent of a household’s gross income. It assumed a mortgage interest rate of 4 percent and 2011 median home prices: $392,000 in Bergen County and $288,000 in Passaic County, as well as incomes averaging $87,400 in Bergen County and $59,600 in Passaic.
The analysis also assumed a 20 percent down payment, a longtime benchmark — though, admittedly, one that is difficult for many households to achieve.
At those numbers, Bergen County households with a typical income would spend 31.9 percent of their monthly income to buy the typical home, down from 42 percent at the height of the housing bubble in 2006 and just below the 32 percent level of 2000. Median-income households in Passaic, by contrast, would have to spend 37.8 percent of their income on housing.
“Monthly mortgage payments, relative to family income, are back to 2000 levels,” said David Stiff, Fiserv’s chief economist. “All the deterioration in affordability that occurred during the housing bubble has been erased.
“But New York is still an extremely expensive market,” he continued. “If you’re a low-income household, affordability is a real problem.”
Otteau said the increased affordability is a signal to buyers that “if you’re considering buying a house, it’s now a safe time to cross the road.”
“Prices are not likely to go lower except in outlying, rural parts of the state or in the largest urban centers,” he said.
But that doesn’t mean sellers can pump up their asking prices. Buyers can’t overpay because their incomes aren’t rising much and banks are no longer willing to write unrealistically large mortgages.
“The likelihood of recouping a price from three or four years ago is very low,” Otteau said. “If you’re a seller, it’s a better time to sell now, but the property needs to be priced competitively.”