Housing affordability in Vermont at record level in 2011
The cost of housing in Vermont continued to decline in 2011, according to The Vermont Economy Newsletter’s annual housing affordability analysis.
“The share of median family income needed to finance the payments on a median priced home in Vermont fell to 13.1% in 2011,” 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 housing affordability. Other evidence suggests that 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 less than 4.5% for a fixed rate mortgage in 2011. Interest rates on variable rate mortgages were even lower. In addition, the median housing price fell slightly, to $189,000 and family income rose in 2011. All three worked to improve affordability in Vermont.”
Woolf also noted that affordability has been improving for the past five 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, 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 is down to just over 13% of median income.”
“Affordability is likely to improve 2012” predicted Woolf. “Mortgage rates will be close to what they are today due to the Federal Reserve’s policy of keeping rates low. Housing prices are unlikely to change much but Vermonters’ incomes will continue to rise as the economic recovery strengthens. That means a modest gain in affordability.”
The housing price used in this analysis is the median price of more than 5,000 residential houses sold in Vermont in 2011. 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.
Vermont Economy Newsletter 4.9.2012