Boom Pushed Ownership Beyond Reach of Many, Study Finds

By Michele Derus
Milwaukee Journal Sentinel
Saturday, March 25, 2006

The recent housing boom moved prices beyond the means of average folks, new research shows.

Families whose full-time jobs pay between minimum wage and 120 percent of their area's median income are less able to afford their own places today than 25 years ago, the Center for Housing Policy in Washington reported this week.

From 1978 to 2003, the national homeownership rate climbed to nearly 70 percent from 65 percent, but homeownership among these modest-income working parents slipped to 59.6 percent from 62.5 percent, center researchers found.

"The incomes of working families simply have not kept pace with rising housing prices. And this is despite low interest rates and new mortgage products designed to make homes more affordable," said Jeffrey Lubell, the center's executive director. His nonprofit group, an affiliate of National Housing Conference, disclosed in its report, "Locked Out," that:

· Housing costs have risen 30 percent faster than incomes since 1978.

· The biggest housing-pay gaps afflict minority and single-parent families, big cities and western states.

· Affordability problems are growing fastest in the Midwest and suburbs.

"It's time to take a second look" at the nation's housing policies, said Ann B. Schnare, the center's chairman. "Simply boosting the overall homeownership rate is an empty gesture unless working families with children are fully participating."

The solution is not bigger loans to home buyers, Lubell said. "I consider the current climate precarious, with exotic loans like interest-only and payment-option capturing 24 percent of the market last year."

It's housing that needs to get more creative, Lubell thinks.

"A healthy housing market has lots of options," he said. "Communities simply need to look at the alternatives."

That includes more rental units and new home-buying options that keep prices down.

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