For most in U.S., real cost of owning a home is down

PORTLAND, Maine — Despite a widespread sense that real estate has never been more expensive, American families in the vast majority of locations can still buy a house for a smaller share of their income than they could have a generation ago.

A sharp fall in mortgage rates since the early 1980s, a decline in mortgage fees and a rise in incomes have more than made up for rising house prices almost everywhere except New York, Washington, Miami and the California coast. These often-overlooked changes are a major reason most economists do not expect a broad drop in prices in 2006, even though many once-booming markets along the coasts have started weakening.

The long-term decline in housing costs also helps explain why the homeownership rate remains near a record of almost 69 percent, up from 65 percent a decade ago.

Nationwide, a family earning the median income would have to spend 22 percent of its pre-tax pay this year on mortgage payments to buy the median-priced house, according to Moody's Economy.com, a research company. The share has increased since 1998, when it hit a low of 17 percent before house prices began rising sharply in many places. But despite the recent increase that has pushed the overall level to its highest point since 1989, it remains well below the levels of the early 1980s, when it topped 30 percent.

"This is a good deal — a good, fair price," Dale Ruttenberg, a 53-year-old bar manager, said of a tan one-bedroom bungalow, with a remodeled kitchen and hardwood floors, that he is buying for $211,000 after having rented in Portland for most of the last decade. In high-profile places like New York and Los Angeles, home to many people who study and write about real estate, families entering the housing market often must spend more than half of their income on mortgage payments, far more than they once did. But the places that have become less affordable over the last generation account for only a fourth of the country's population.

Elsewhere, families tend to spend far less on housing. In Dallas, the share of income needed to buy a typical house has fallen to 13 percent this year, from 31 percent in 1980. In Tampa, it has dropped to 21 percent, from 25 percent in 1980. Even in New England, where soaring prices have frustrated many young families, houses have still not reached the heights of the early 1980s, when calculated as a share of income.

"Over 20 years, affordability has definitely improved because interest rates are much lower," said Kenneth T. Rosen of the the University of California, Berkeley. Houses have also grown bigger, he said, so people are getting more for their money.