Real Estate Prices Could be Exploiting Residents of Lehigh Valley, Pennsylvania

A new study assessing the real estate market in Lehigh and Northampton counties carries the bureaucratically generic title, "An Affordable Housing Assessment of the Lehigh Valley in Pennsylvania."

Inside, though, is a plethora of information about local housing that should cause real estate professionals as well as buyers and sellers plenty of alarm, despite the benign nature of the report's title. For in the study, commissioned by the Lehigh Valley Planning Commission, comes information about which many have been in denial but is a nasty and inescapable truth: We're pricing ourselves out of the market.

Here, then, is my own title for this housing red-alert: Grasping the Obvious.

Anyone who has followed the Lehigh Valley market cannot be surprised at the conclusions drawn in the report, compiled by Mullin and Lonergan, a consulting group with offices across the state.

The firm's simple summation concludes that the average person in the Lehigh Valley cannot afford to buy the average house there.

Yes, we know.

Or we should.

According to Mullin and Lonergan, the typical (median) home in the region costs $189,000. Assuming that mortgage payments should not take up more than 30 percent of household income - a figure I think is a bit low -it would take $56,700 to comfortably afford that median home.

In Lehigh County, median household income is $48,957, while in Northampton County the number is $53,696 - both well short of the amount needed. The rest of the equation isn't hard to follow.

Sales have fallen dramatically. Year-over-year totals show the market covered by the Lehigh Valley Association of Realtors posting double-digit sales decreases. February 2007's total was 11 percent lower than February 2006. In January 2007 the numbers were even more dramatic, showing a 22 percent year-over-year drop.

In both months, average sales prices ticked stubbornly upward while the median, which is the point at which half the houses cost more and half less, has stayed roughly the same.

All of which means that the local housing market isn't quite ready for the cure to what ails it.

The national market is getting it. In the most recent National Association of Realtors figures, U.S. sales showed a 3.9 percent increase in February while median prices were falling 1.3 percent. The figures were mocked in some venues as displaying a fundamental weakness in the national housing market.

Not true.

If the housing market is going to get healthy again it will have to come to grips with- apologies to Alan Greenspan - the irrational exuberance that sent prices skyrocketing and Middle America scrambling to find ways to achieve the home ownership dream. Too many people, faced with an inability to buy homes using conventional means, turned to the subprime market and its empty promises that will push more than 1 million Americans out of their homes this year.

They say real estate is a local market, and I believe that. While areas of this country have suffered during the so-called real estate "bubble," others have thrived, including the Lehigh Valley.

But it will not do so any longer until it heeds the much-needed price correction taking place across the rest of the nation.

Mullin and Lonergan found that, as of the last census, more than a third of Lehigh Valley homeowners spend more than 30 percent of their income on housing. That's a lot.

But while the report brings up many fine points, it rates an "incomplete" in the area of proposed solutions: Mullin and Lonergan suggest that the key to bringing housing costs under control lies in government programs that encourage affordable housing and provide grants and tax credits to those who are burdened by housing costs.

Not that those things are bad ideas, but here's another one.

The real estate industry needs to have a long talk with itself on pricing. In addition to all the other depressing housing numbers in the Lehigh Valley, average time on the market has risen about 25 percent over the past several months. Where a typical house generally sold in 47 or 48 days that number has risen to 60. Still think there's no correlation between pricing and sales?

Real estate is a complicated field, both an art and a science, and posed now with the monumental task of digging itself out of a troubling slump.

Figuring out how to price us back into the market would be an important and effective way to get started.