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Affordability of Housing

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On the front page of today’s New York Times is a report [2] that I hope against hope that Paul Krugman reads the next time he’s tempted to write that ordinary Americans are no better off economically than we were a generation or so ago.

Here are the opening paragraphs of the NYT report:

Despite a widespread sense that real estate has never been more
expensive, families in the vast majority of the country can still buy a
house for a smaller share of their income than they could have a
generation ago.

A sharp fall in mortgage rates since the early 1980’s, a decline in
mortgage fees and a rise in incomes have more than made up for rising
house prices in almost every place outside of New York, Washington,
Miami and along the coast in California. These often-overlooked changes
are a major reason that most economists do not expect a broad drop in
prices in 2006, even though many once-booming markets on the coasts
have started weakening.

The long-term decline in housing costs also helps explain why the
homeownership rate remains near a record of almost 69 percent, up from
65 percent a decade ago.

(Hat tip to Karol.)

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