Lately, mortgages have been on my mind. I remember long ago writing about the topic and discovering that the word mortgage, from the Old French and ultimately Latin, literally means "death pledge." An odd etymology--you'd think the word "mortgage" would have been better suited to describe marriage, considering that "'til death us do part" is the traditional vow. Maybe medieval French etymologists had a premonition about marriage in the latter part of the millennium and decided it was inappropriate.
Or better yet, perhaps they had a premonition of Denver and Colorado in the 21st century: places where the traditional ability to acquire home financing would go through death throes.
A recent report on home affordability conducted by the real estate research firm ATTOM Data Solutions notes that of the 12 counties in the United States where home affordability is at its lowest level--ever--seven of the counties are in northern Colorado, with four in the Denver metro area. The measurement used was the percentage of homeowners' wages it would take to pay a mortgage and related costs--traditionally thought of as optimal in the 25 percent to 30 percent range. Today in Denver and the Front Range, we're looking at percentages exceeding 40 percent and even 50 percent, based on median home prices and median local wages.
In other words, housing prices have skyrocketed so far out of whack that we're at the tipping point of where people simply can't afford to buy the American Dream. This is not a good thing for the Colorado economy, as there are only two possible outcomes: 1) out-migration; people will move away to more affordable communities and, importantly, companies (employers) will do the same so their employees can afford to own homes and raise families on the wages provided; and 2) urban sprawl; home builders will buy up cheaper land on the far, far reaches on the metro areas to build more affordable, desired housing.
Neither scenario is good, and both would have a negative impact on current housing values, not to mention the ability to sell here and out-migrate to either developable farmland or more moderately priced communities in Nebraska, Kansas, Texas or wherever. Both of these things have happened before, right here in Colorado.
I marvel at the price of even modest homes these days. Bungalows in Denver, even in marginal neighborhoods, are going for $400,000...