Palm Beach Post Staff Writers
Monday, December 08, 2008
The golden rule of not spending more than 25 percent of your income on housing no longer applied for nearly four of every 10 mortgage holders in Palm Beach County in 2007, Census figures show.
That number probably is higher now and likely to grow even more before getting smaller, housing analysts say.
"With the amount of new foreclosures, high unemployment, in addition to historically high amount of inventory means we're seeing more households spending a larger portion of income toward housing expenses," said housing analyst Jack McCabe, of McCabe Research Consulting in Deerfield Beach. "Unfortunately that's going to hold true, and we'll probably see those rates increase by the end of next year."
Survey data released Monday by the U.S. Census Bureau shows that more than 25 percent of Palm Beach County residents spent at least 35 percent of their household income on housing costs in 2007, up from 24 percent in 1999.
The growth in the number of people spending more than 35 percent of their income on their mortgage, property taxes, insurance and utilities was even greater in local cities: from 21.1 percent in 1999 to 30.7 percent in 2007 in Wellington, from 20 percent to 32.9 percent in Royal Palm Beach and from 22.8 percent to 33.8 percent in Port St. Lucie.
That's largely because home values were skyrocketing between 2000 and 2007.
In Wellington, more than 32 percent of homes were valued over $500,000, up from 3.6 percent in 2000. In Jupiter the percentage was 25.6 percent, up from 6.4 percent in 2000, according to the Census data.
Before the real estate bust, incomes were rising about 3 percent while the cost of living was going up 25 percent to 30 percent, said Bill Davis, mortgage banker for Private Funding Specialists.
"That was one of the things led to the crash," Davis said.
McCabe says the percentage of mortgage holders paying more than 35 percent of their income for housing has probably grown since 2007 because the unemployment rate in Florida rose from 4.2 percent two years ago to 6.7 percent this year, and he expects it to rise to more than 10 percent in 2009 before improving in 2010.
He also anticipates 3 million foreclosures on a national level in 2009, up from about 2 million this year.
McCabe expects it to start trending back toward the 2000 percentages in the beginning of the next decade.
"In 2010, we'll see the effects of lower housing prices and hopefully lower taxes because house values have dropped, and correlatively you'll have lower insurance cost," McCabe said. "Then you should see the rate in 2011 come down."
But for now, while home values and mortgage rates drop, even those who can afford to buy homes are cautious about committing themselves.
"What's happened in the last three months, is that even though people can afford, they're so fearful of the future that they postpone that decision to purchase for several months, maybe even a year, and see which way the economy is going," Davis said.
source: palmbeachpost.comlink to the original post:
http://www.palmbeachpost.com/localnews/content/local_news/epaper/2008/12/08/a1b_census_1209.html
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