Wednesday, August 06, 2003

A very interesting piece in today's NYTimes suggest the refi-financed consumption boom was hardly American at all. While folks in the Bay Area, Boston and New York City binged off refi loans, housing prices in most of the country haven't moved much at all.
But while the boom has become the subject of daily conversations among the middle class and affluent in New York, San Francisco and Los Angeles, people in much of the country have little housing bounty to tap for home improvements, retirement or other needs. From Fort Wayne to Rochester to Salt Lake City, the prices of typical homes across most of the country's vast middle have risen just ahead of inflation � and more slowly than incomes. The cost of homes in the most expensive cities is now about six times that in the least expensive, up from a ratio of three to one two decades ago. . . .

households in the middle of the country that fall behind on mortgage bills cannot rescue themselves by dipping into their rising home equity and making up for a series of missed payments in one swoop. The states where home foreclosures have spiked most sharply since 2000 � including Indiana, which tops the list � are in the Midwest or Southeast. . . .

Over the long term, house values tend to increase at roughly the same rate as incomes in any region, economists say. Because prices have outgained incomes on the coasts the last two decades, many analysts expect the housing gap to narrow eventually � but they were saying the same a decade ago.


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