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HOI - Housing Opportunity Index

 
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john p



Joined: 10 Mar 2006
Posts: 1820

PostPosted: Wed Jul 23, 2008 7:07 pm GMT    Post subject: HOI - Housing Opportunity Index Reply with quote

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.
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john p



Joined: 10 Mar 2006
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PostPosted: Wed Jul 23, 2008 7:37 pm GMT    Post subject: Reply with quote

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
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admin
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Location: Greater Boston

PostPosted: Thu Jul 24, 2008 7:42 pm GMT    Post subject: Re: HOI - Housing Opportunity Index Reply with quote

john p wrote:

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


Do you mean what happened in 1997 that caused affordability to start to decline? Or do you mean why was affordability in 1997 so much better than the more recent years you listed? I think that in the past, affordability has always been better than in recent bubble years. You could very well be right that the "Taxpayer Relief Act" was an early catalyst that led to the decline in affordability. The late 90's were also when the dot-com bubble was pushing up incomes dramatically for those in technology, much more so than for the median income, which would probably also drive the affordability index down (as those with inflated incomes could more easily outbid normal folk). 1997 also looks like when real prices finally started to head back up from the last down cycle:



The price to income ratio was well within the historical average range in 1997, so affordability had a little room to fall:



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john p



Joined: 10 Mar 2006
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PostPosted: Thu Jul 24, 2008 8:36 pm GMT    Post subject: Reply with quote

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.
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admin
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PostPosted: Thu Jul 24, 2008 8:51 pm GMT    Post subject: Reply with quote

john p wrote:
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?


The S&P/Case-Shiller Index only includes single family homes. So neither the original 3-family or subsequent condos would affect the index directly.

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john p



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PostPosted: Thu Jul 24, 2008 10:11 pm GMT    Post subject: Reply with quote

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...
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admin
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PostPosted: Fri Jul 25, 2008 2:39 am GMT    Post subject: Reply with quote

john p wrote:

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...


At the risk of veering too far off on a tangent... I'd say it's healthier to have two incomes, provided that you can get by on just one. Redundancy is a huge plus to stability. However, the benefit is turned into a big negative when the second income is used to bid up things like housing and education. Then everybody needs two incomes to compete in the bidding wars and once the second income becomes necessary it then turns from a stabilizer into a de-stabilizer because you then have two single points of failure. Here's another book which takes the opposite view from the one you listed (I've read neither):

http://www.amazon.com/Two-Income-Trap-Elizabeth-Warren/dp/0465090907/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1216952919&sr=1-1

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