On Long Island, More Are Priced Out of the Housing Market – New York Times
In 2000, 60 percent of the homes sold on Long Island could be classified as “affordable” for families earning up to $100,000 a year, under the old rule of thumb that buyers should spend no more than 2.5 times their income on places to live.
Last year, according to a new report, just 2 percent of the houses sold on Long Island were in that range for families with such earnings, which make up more than 60 percent of Long Island households.
Uh, nice try Long Island. You can try all you want to beat Cali in the affordability game, but let’s face it – you got lots to learn.
First, who uses the 2.5x benchmark anymore? That’s so 2000!
Get with it you old fashioned East Coasters! It’s 2007! Everything has changed! Income means nothing!
Here’s how you compute affordability:
The minimum household income first-time buyers needed to purchase a home at $478,710 in California in the third quarter of 2006 was $98,890, based on an adjustable interest rate of 6.58 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,300 for the third quarter of 2006.
See? You have to assume that first time buyers will get a house that’s 85% of the median price. Then you have to assume that they’ll only put down 10% (why trap your equity?) and then you have to assume that it rainbows and unicorns will appear.
That’s how you get that Santa Clara County has an affordability index of 27.
Long Island, I bet if you used the paradigm shifted formula, you’ll see that your affordability is 40… or even worse… 50. And as we all know, being affordable means being bad – because if you can afford it, it must not be good.
And here’s another shocker from the Times piece:
Even for families with incomes above $110,000, 43 percent report difficulty in paying housing bills.
Wow… you guys are so behind the curve. Don’t you know? When you fall behind, just refi or HELOC! And don’t forget, you can refi your car too! Unlock that trapped equity!
Long Island – it’s time to do it Cali style.