Overreaching for the roof: home buyers are stretching the purse to live American dream.Home prices are rising faster than incomes, causing home buyers to hazard at risk; liable to suffer damage or loss. See also: Hazard a financial stretch they can't sustain, finds a report by The Joint Center for Housing Studies at Harvard University Harvard University, mainly at Cambridge, Mass., including Harvard College, the oldest American college. Harvard College Harvard College, originally for men, was founded in 1636 with a grant from the General Court of the Massachusetts Bay Colony. . Median home prices grew four times faster than the average income in Washington Washington, town, England Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. , D.C., and Baltimore Baltimore, city (1990 pop. 736,014), N central Md., surrounded by but politically independent of Baltimore co., on the Patapsco River estuary, an arm of Chesapeake Bay; inc. 1745. between 2003 and 2004. In Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. , increases in home prices outpaced increases in income by almost five times during the same period. Skyrocketing prices haven't shut out buyers, but rather caused them to take desperate measures to become homeowners, says Nicolas Betsinas, director of the Joint Center and author of The State of the Nation's Housing 2005. Borrowers are choosing riskier loans such as interest-only mortgages, adjustable prime loans that lower monthly payments for a limited time but doesn't allow borrowers to pay down principal. For example, in September a monthly mortgage payment on a $200,000 30-year fixed rate loan at 5.8% would have been $1,173. On an interest-only adjustable rate mortgage This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. at 4.48%, it would have been $746 during the first year, but the principal would still be owed in full after the interest-only period on your loan expires. A strengthening economy typically triggers interest rate hikes, which would cause monthly mortgage payments on an ABM ABM: see guided missile. ABM - Asynchronous Balanced Mode to increase. But a strong economy doesn't necessarily guarantee increases in salaries. "You've stretched in order to afford this mortgage, and you've stretched as far as you can. Now your payment has increased," Retsinas says. "That payment shock could in some ways undermine your homeownership." Just getting a job used to be enough to enable people to become homeowners, Retsinas adds, but today workers go out on a limb to purchase property. And low-income people are no longer the only ones affected. "Because home prices have so far exceeded income growth, it's the income scale," he says. 2004 Median Home Price Los Angeles $446,400 New York $395,800 Washington, D.C. $351,100 Chicago $246,300 Baltimore $239,600 Detroit $191,700 Philadelphia $186,400 Memphis, TN $136,200 Houston $136,000 Note: Table made from bar graph. |
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