CHICAGO -- Household income of homebuyers kept pace with increases in home prices in 1989, due largely to an increasing number of two-income households and soft spots in the real estate market, a title insurance company reported Monday.
The 14th annual Home Price Survey by Chicago Title & Trust Co. showed the median prices of homes purchased last year increased 6.47 percent, to $129,800 compared with $121,910 in 1988.
The median income of 1989 homebuyers increased 6.34 percent, to $58,700 compared with $55,200 in 1988.
The 1989 survey marked a major improvement over 1988, when the median home price soared 22.82 percent, while the median income of buyers went up only 7.18 percent.
The average monthly mortgage payment increased 4 percent to $1,054, compared with $969 in 1988. But the mortgage took less of a chunk of household income -- 34.1 percent compared with 34.8 percent in 1988.
The news, however, was not all good.
'The fact that significant price corrections are now under way in some over-extended housing markets ... should not surprise anyone,' the survey noted. 'What may surprise is that price gains in other areas of the country have more than offset these declines.
'In fact, rising home prices continue to reflect a widening economic gap between those who buy houses and those who do not,' it added. 'And, despite the rising number of two-income families in the market today, income gains have lagged behind home price increases by a half a percentage point every year over the past 13 years.'
John Pfister, Chicago Title & Trust vice president and manager of market research, observed, 'While this may not seem like much, over time a discrepancy of this size adds up.'
When Chicago Title & Trust began its annual Home Price Survey in 1976, the median price was $43,340. Last year's median of $129,800 marks an increase of more than 199 percent for the 13-year period.
During the same span, the median income of home-buyers increased about 182 percent, from $20,840 to $58,700.
The income of buyers might have lagged even further behind prices had it not been for the increasing number of two-income families in the home-buying population.
Pfister said the surveys have shown working couples were the major factor influencing housing affordibility in the 1980s.
Two-income families represented 79.3 percent of all homebuyers, and 86.8 percent of first-time buyers, last year. In 1988, two-income families represented 77.7 percent of all buyers and 85.5 percent of first-time buyers.
The study showed the number of first-time buyers purchasing new homes declined to 17 percent, compared with 23 percent a year earlier.
'What this tends to suggest is that first-time buyers, in general, were increasingly priced out of the new home market last year and opted for older, less expensive houses instead,' the survey concluded.
San Francisco replaced New York last year as the city with the most expensive housing. The median home price in the San Francisco area was $199,900 last year compared with $179,700 in 1988.
The median price of a home in New York City dropped to $166,200 last year, compared with $192,600 in 1988.
Cleveland had the lowest median housing cost -- $75,800, down from $76,800 in 1988, when Cleveland also had the nation's lowest median home price.
By region, housing was most expensive in the Northeast -- with a median price of $156,500. Home prices were soft in New York City and Boston, but increased in Philadelphia. And Washington, D.C., reported a strong market for luxury homes.
The West ranked as the second most expensive housing market, with a median price of $149,900. The Seattle-Tacoma area posted the highest increase in median home prices -- a 15.5 percent jump, from $85,600 to $98,900.
The Midwest was third, with a median price of $99,200, and the South ranked fourth and last among the regions, with a median price of $92,000.
'Although there were some soft spots in some individual markets, the median and average home prices rose in all four census regions,' the survey reported.NEWLN: adv monday feb 5
