_[John Philip Mason is a residential appraiser with 20 years experience and covers the Hudson Valley region of New York. He’s a good friend and a true professional who believes that all appraisers need to have a macro-economic perspective in order to be effective. His post in this week’s Solid Masonry reflects his lack of interest in links, except those between housing and affordability.]_ …Jonathan Miller

>Disclaimer: Please forgive me this week, I decided to write about the issue of affordability and forgo backing up my observations with links to well written articles. While I think most would agree that I’m simply stating obvious facts, I thought it would be interesting to compile a list of these items. All too often we’ve seen these issues discussed independently, but I think their full weight is to be realized in their collective impact on the greater issue of affordability.

We’ve all been told the three factors that most impact the value of real estate are location, location and location. But now it would seem affordability is under attack, and from just about every direction. Consider that during the past year or two we have seen:

* Home prices have remained at or near historically high levels, despite increasing inventory and a reduced number of sales. _Point of reference here, 5-10% off a gazillion dollars is still almost a gazillion dollars._
* Interest rates have climbed for all mortgage products.
* Energy costs have stabilized, but at price levels that were unimaginable just 2-3 years ago.
* Local real estate taxes have increased at a steady upward trend, often exceeding the rate of inflation. This comes from unfunded mandates at the federal and state level (a pet peeve of mine); increasing health care costs for government workers and school budgets that teach both the young and old the true meaning of “new math.”
* Americans are so poor at saving (cheap pun) (double pun); a recent study indicates our national savings rate is now in negative territory. _So can you still call it savings?_

Add to this some potential mine fields, such as:

* Fannie Mae was caught in a scandal that included cooking the books, which still might take another 2-3 years to get out from under.
* Some leading mortgage lenders are starting to sell off portions of their loan portfolios, in order to “reduce their risk.” _In other words, they see smoke and where there’s smoke._
* Various government agencies are attempting to address mortgage fraud (too little, too late). The inevitable changes are bound to impact mortgage availability, even for honest borrowers.

After considering all of the above, it becomes clear the cost to participate in the home ownership market has been forced upwards from many directions. In addition, the changing undercurrents in the mortgage industry may only compound the affordability issue. As such, it should come as no surprise that today’s market is a little over-inflated. Yes, I said it, over-inflated.

Because after all, isn’t it possible the three factors that most impact real estate today are affordability, affordability and affordability?