October 16, 2005
The income gap is a helpful overall measure of housing market fundamentals but should be taken with a grain of salt, said Delores Conway at the University of Southern California's Lusk Center for Real Estate. That's because people can buy houses priced below the median price and interest-only loans, adjustable rate mortgages, subprime loans and other forms of "creative financing" make it possible today for people to buy, Conway said. Equity from selling a house also helps close the gap by letting the buyer make a substantial down payment and reducing the price, Conway said. The market tends to self-correct itself, said Conway, who predicts that prices will begin leveling off in the next couple of years.