bostonbubble.com

[john p]

HOI - Housing Opportunity Index:

I'm gathering that it means the percentage of recently purchased homes that could be purchased with no greater than 28% of the median household income in that region.

http://www.nahb.org/page.aspx/category/sectionID=135

scroll down to row 227 for Boston/Quincy
http://www.nahb.org/fileUpload_details.aspx?contentID=34325

Highest was Quarter 1 / 1997: 70.7
Lowest was Quarter 2 / 2006: 22.3
Last year Quarter 1/2007: 28.3
Today Quarter 1/ 2008: 44.1

What the Hell happened in 1997? Has anyone stumbled onto anything that happened that year?

Anyway, I think this suggests that there is signficantly more available affordable housing on the market today. My guess is that the surcharge of short sales and foreclosed homes on the market are adding inventory on the "affordable" end of the price structure.

[john p]

I just found the answer to my question:

In 1997 they introduced a "Taxpayer Relief Act". One major component was that capital gains from a real estate sale was tax exempt up to $250k for an individual and $500k for a couple.

http://www.bankrate.com/brm/news/real-estate/20041018a1.asp

This in't a bad read:

http://www.bos.frb.org/bankinfo/conevent/regional/2006/kodrzycki.pdf

[admin]

[john p]

I just noticed that 1997 had something going down, trends like the ones you posted seem to indicate something that warranted exploration and explanation.

I think that if babyboomers were buying income properties, they may have been buying from the "affordable" stock of homes. Further, what was absolutely huge in Massachusetts (in the 128 Belt) was the CONVERSION OF LARGER HOMES INTO CONDOS!!!) I'm such a nerd for capitalizing, but anyway how would Shiller deal with a triple decker which was considered a 3 family turning into three smaller condos? Are these Indicies comingling condos with single family homes? If so that's a big deal because we all know that lots and lots of homes were converted to condos. I'll dig in to see what's what.

[admin]

[john p]

That is curious because when you think about the nature of "starter housing" in Massachusetts it transformed from the typical GI starter cape, to the raised ranch and then most couples starting off went into condos or 2-families.

You know, maybe in 1997 we had babyboomers in their peak earning years which would have driven up household income? Add to that that many mothers in the babyboom went back to work:

check out figure 5 on the 2nd to last page:

http://www.nber.org/papers/w11836.pdf

It shows that the average hourly wage of the employed spouse really shot up around that time period.

Also, this book came out in 1997, it was a changing paradigm shift in thinking about the family. It basically said that it was healthier to have two earners...:

http://www.amazon.com/She-Works-Two-Income-Healthier-Better-Off/dp/0062510800

http://findarticles.com/p/articles/mi_m1568/is_n5_v29/ai_20521303/pg_6

And if you take into consideration that people were coming out of a deep recession in the early 1990's, many families had the head of household lose their job and it was better to have two earners to help stabilize their finances...

[admin]