A Look Ahead to Affordable Housing

As the local real estate market has cooled over the last few months, many home buyers continue to wait for additional cooling. The Maryland Association of Realtors (mdrealtor.org) reported that home sales in Montgomery County for total units sold decreased over the last six months as compared to the same time in 2005. Although sales decreased, the average home price increased about 1.5% during the same time period; that is until December. December 2006 recorded a decrease in the average home price in Montgomery County of about 5.3% as compared to the same time in 2005.

Whether December’s statistic is an aberration or the start of a trend, the fact is that many home buyers continue to be squeezed due to the lack of affordable housing. Additionally, many home owners are being squeezed as well as home maintenance costs continue to rise.

The Maryland Association of Realtors has been keeping a record of affordability in the form of the Maryland First Time Homebuyer Affordability Index (MDHAI) since 2000. The index is a monthly indicator of the affordability of a starter home for prospective Maryland first time home buyers. The index and affordability have a positive correlation. The highest level the index reached was 80.1 in 2001, which meant that the average home buyer had 80.1% of the income needed to purchase a home. Since then, the index has decreased to 66.8, 61.9, and 53.2 in 2003, 2004, and 2005 respectively. The October 2006 index was 44.9, which was an improvement of the last six months.

Although the regional economic outlook for next decade is strong, other factors threaten housing affordability. A study conducted by the by the Maryland Association of Realtors entitled “the Future of Housing” cites rising interest rates, population growth, housing appreciation, moderate income growth, rising real estate taxes, and rising energy costs as obstacles to affordable housing.

It is clear that affordable housing is and will continue to be a regional issue. Although, federal, state and local government resources exist for home buyers and home owners in need of financial assistance, non governmental resources are being created to assist those in need as well as to assist with policy and research.

The Maryland Association of Realtors has created several initiatives to educate consumers about affordable housing resources. The Maryland Association of Realtors Housing Affordability in Maryland website (marhousingaffordability.org) provides research, statistics, and resources. The MD Home Programs website (mdhomeprograms.com) provides home buyers the appropriate resources and education to assist in the purchasing process. The League of Maryland Home Owners (leagueofmarylandhomeowners.com) is a coalition of home owners and prospective home buyers advocating for solutions to the affordable housing dilemma.

Although affordable housing is not one of the top legislative topics for the new Maryland legislature, it continues to be one of the top areas of concern. The Maryland League of Homeowners has an open letter to Governor Elect O’Malley and other state representatives that outlines recommendations for housing affordability which include several business and personal tax incentives, statewide coordination of resources, and additional funding for workforce housing.
If you are concerned with the future of affordable and workforce housing, you are encouraged to go the Maryland League of Homeowners website (above) and sign the open letter to our elected state representatives.

By Dan Krell
Copyright © 2007

This column is not intended to provide nor should it be relied upon for legal and financial advice.