Housing affordability continues to improve: At record level in 2012
For the sixth consecutive year, housing in Vermont became more affordable to the average Vermont family in 2012, according to The Vermont Economy Newsletter’s annual housing affordability analysis.
“The share of median family income needed to finance the monthly payments on a median priced home in Vermont fell to 11.7 percent in 2012,” said Art Woolf, author of the study. “That means housing is more affordable today than it has been in the 25 years we have been tracking Vermont housing affordability. Housing has not been this affordable since at least the early 1970s,” he continued.
Woolf explained why housing affordability improved: “The most important reason was the continued decline in mortgage rates, which averaged well under four percent for a fixed rate loan—the lowest rate in more than 60 years. Housing prices increased slightly, which reduced affordability, but rising incomes compensated for that. When you put all three of those factors together, the result was a significant improvement in affordability.”
Woolf also noted that affordability has been improving for the past six years. “A Vermont family earning the state’s median income spent 14% of its income to service the mortgage on a median priced home in the late 1990s. As the state’s housing market boomed along with the nation’s, affordability worsened and by 2006 it took 19% of a median family’s income to pay for the mortgage on a median priced home. Today that share down to just under 12% of median income.”
The housing price used in this analysis is the median price of more than 5,000 residential houses sold in Vermont in 2012. The VEN analysis is based on property transfer tax data from the Vermont Tax Department. It does not include vacation homes. Half of the homes sold cost more than the median and half cost less. Mortgage rates used in the analysis are 30 year fixed rate mortgages with a 20% down payment. The income measure used is the median income of married taxpayers filing joint returns, calculated from Vermont Tax Department data. Two-thirds of all Vermonters live in married couple households.