Affordable Housing: Number Crunching

One of you out there asked what the median income is in our area. I'm working on finding out. In the meantime, chew over this post.

Average young professional income:

• The median income for families headed by people aged 20 to 29 was just under $28,000 in 2004, according to Federal Reserve statistics. Adjusting for 3% inflation each year this may be more like $30,500 now.
  
• The median income for families headed by people aged 30-39 was $48,000. Perhaps $52,500 with inflation.
  
• One-third of twenty-somethings made $20,000 or less.
  

Average young professional debt:

• The average debt load for a bachelor’s degree hovers around $19,000. Additional $31,000 for a grad degree.
• Americans age 25 to 34 tend to carry a balance of more than $4,000 in credit card debt according to Demos, a research firm in New York.

Average cost of housing:

• The average cost of an existing home in Lehigh and Northampton counties in September was $217,000 according to statistics from the Lehigh Valley Association of Realtors

Number crunching: Is housing affordable?

The FHA says most people can afford to spend 29% of the annual gross income on housing costs, which include mortgage payments, property taxes and other regular costs.

Annual Gross Income 29% of Gross Income Monthly
20k 5800 583
30k 8700 725
40k 11600 966
50k 14500 1208
60k 17400 1450
70k 20300 1691
80k 23200 1933

Typical mortgage payments for a 30-year fixed-rate mortgage:

Mortgage Amount 6.5% 7% 7.5% 8%
100k 632 668 699 734
150k 948 998 1048 1100
200k 1264 1331 1398 1468
250k 1580 1663 1748 1834
300k 1896 1996 2098 2201

So therefore the average “affordable house” for a single 20-29 year old is $100,000-150,000.

Average “affordable house” for a couple aged 20-29 years old is $200,000-250,000

Average “affordable house” for a single 30-39 year old is $200,000.

(NOTE: Women are now first marrying later in life. In the early 1960s, 80 percent of women had been married by the time they turned 24. Today, most women have not yet been married at age 24, and it is not until age 32 that 80 percent have been married.)

Again, the average housing cost in the Lehigh Valley is $217,000.

Housing developments in the area that target young professionals have priced themselves out:

• Riverport Condos, Bethlehem: the low $200,000s to $400,000 making it only “affordable” to households earning $60,000 or more.
• The Farr Lofts, Allentown: $1,000-1,500 a month to rent making it only “affordable” to households earning $40,000 or more.
• Estonian Condos, Easton: the high $200,000s and up making it only "affordable" to households earning roughly $75,000 or more.

Clearly there is a disconnect between what yps want and what we can afford.

However, there is some assistance available:

Pennsylvania Housing Financial Agency offers a lower interest mortgage for first-time homebuyers who fit within income and purchase price limits.

For a 30-year fixed mortgage rates are:
KHL 0 pts 6.25%
KHL 1 pt 6.125%

Lehigh and Northampton Counties Limits:
Maximum purchase price - $289,000
Maximum household income
1-2 members - $65,900
3 or more members - $75,700

FHA loans benefit those who would like to purchase a home but haven't been able to put money away for the purchase, like recent college graduates, newlyweds, or people who are still trying to complete their education. FHA home loan - 203(b) finances up to 97 percent of a home loan. It is the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency.

Insurance on FHA mortgages are often rolled into the total monthly payment at 0.5 percent of the total loan amount which is roughly half of the price of mortgage insurance on a conventional loan. The maximum amount for an FHA loan in Lehigh and Northampton Counties is $305,666.