Yet more evidence is turning up that home-buyers' income haven't been as squeezed as the figures suggest. It's true that the rise in the cost of houses has outpaced median incomes in recent years. But this fact may surprise you: The actual dollars' worth of income available for housing purchases has risen much faster.
That happened thanks ot the Equal Credit Opportunity Act of 1975, which made it illegal for lenders to discriminate against women's incomes. Overnight, a surge of new money was put at the home-buyer's disposal.
Prior to 1975, mortgage lenders generally ignored the income of women of childbearing age, or counted only a small percentage of it. This was done on the assumption that, sooner or later, they would quit work to look after children. Home loans, by and large, were granted entirely on the basis of the husband's earnings.
The equal credit law changed all this. Mortgage lenders were forbidden to ask women about their childbearing plans, or to make an automatic assumption that the woman's income wouldn't last. Nor were they allowed to discount part-time income without making an individual judgement as to reliability and continuity of the part-time work.
Formerly, a household where the man made $20,000 and the woman $10,000 was probably counted as a $20,000 family for mortgage lending purposes. After ECOA it became, at a stroke, a $30,000 family, able to carry a higher mortgage and buy a more expensive house.
From 1972 to 1977, the rise in house prices put an apparently heavy burden on home-buyers. While median incomes rose 45 percent, the monthly mortgage payments on the median existing home rose 80 percent, and on new houses, 95 percent.
But that doesn't reflect the experience of two-income families. As estimated by Robert J. Mylod, president of Advance Mortgage Corp., the income available for mortgage purpose rose 130 percent during that period for families where wives worked part-time, mortgage-available income rose 105 percent. The two-job family, in other words, could pay the price.
It has generally been said in the past that you could afford a house worth 2.5 times your annual income. In 1977, new houses were priced at only 2.1 times the income of working couples. The squeeze is mainly on families where only the husband is employed. New homes cost 3.1 their annual incomes.
Recent research has shown that about half of all home-buying families have more than one income. This fact has generally been interpreted negatively - that is, that house prices are so appallingly high that it takes two earners to afford one.
That may tell the story backwards. The truth of the matter appears to be that because so many families now have two incomes available to invest in a home, builders are putting up the more expensive houses that these families want and can afford.
Counting income of wives when making mortgages has had several crucial effects on the housing market:
First, by raising the incomes available for housing purchases, it has created more demand for higher-priced housing. This helps explain why there has been so much activity at the high end of the housing spectrum at a time when, on paper, houses were "unaffordable."
Second, the continuing heavy demand for houses has added to housing inflation. Prices are higher than they might have been had women's incomes still been on the shelf.
Third, it has made families more able than they used to be to carry high-interest mortgages. "Demand for mortgages is high even in the face of 10 percent money," says Mark J. Riedy, executive vice-president of the Mortgage Bankers Association. "There's no question that counting women's income has helped support this demand."
Fourth, it locks working wives into the family spending pattern to a greater degree than some of them might wish. Once her earnings go on the line for a better house, she can quit work even if she wants to.