Housing appears to be more affordable today than it has been in other periods of our history, for numerous reasons. Read this entire post; it is well-researched and argued.

“People aren’t really shopping prices,” said Bill Trask, a broker at Coldwell Banker Friends and Neighbors Realty in suburban Portland, ME. “They’re shopping payments.”

A monthly mortgage payment (MMP) is the product of a debt service constant (DSC) times a purchase price (PP).  But simple algebra reveals, of course, that:

… if debt service costs go down, prices go up but affordability remains unchanged.  And debt service costs have gone down:

The sharp fall in mortgage rates – from above 10% through most of the 1980’s to less than 6% in the last few years – is the main reason.  Upfront mortgage fees have also dropped to about a third of a percentage point of a loan’s value, from 2.5% 20 years ago.

But relative to the Charlottesville market,

The median sales price for the entire market area in 2005 was $255,000 which is $30,000 more than the previous year’s figure. Nelson led the way with a median price of $300,000 (up 28%) followed by Albemarle $285,000 (up 8%), Charlottesville $247,428 (up 12%), Greene $234,900 (up 31%), Fluvanna $230,000 (up 24%), and Louisa $205,200 (up 19%).  The overall market, including properties outside the areas listed, increased by 13% to a median price of $255,000.  (Note: Albemarle’s median price increase was lower than other areas because of a significant increase in affordable condo units.)

The Charlottesville region’s average income is $56,487 and the median income is $45,022. Source: TJPED (pdf) The median income for the City of Cville is significantly lower than that of Albemarle – $33,122 -v- $54,604, but the affordability issue is a regional one, not one that is specific to the City.

You do the math.