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Home price and income ratios
Wednesday, January 28, 2009
This is a follow-up to last week's posts on the ratios for median home prices to median household income. Both ratios - for new and existing homes - are shown below.
See also:
- Jan. 19 - How far to a bottom in housing?
- Jan. 19 - New home prices and median income
- Jan. 21 - Existing home prices and median income
4 comments:
So looks like another year or so before it makes sense to buy again?
Interesting graph -- when we bought in the early 80s the interest rate was sky high, but that was a GOOD thing because we bought the house partly as a tax write-off against our incomes. The house payments were, like the graph shows, not so bad in terms of our income. We've watched people buying homes they could barely afford and just shook our heads. This chart makes it look like buying homes could soon make sense again!
Wait for the overshoot.
I think this backs up what I posted. The west side of LA is still very inflated and is mostly resale. Decline will happen later and drag out longer with the move up buyers. Move ups will sit on their losses.
In my area, Manhattan Beach still has plenty of houses at double rent. Redondo is showing lots of cracks and is much closer to parity. Most things are still 1.5x rent cost. But getting close with the REO.
Still think a major undershoot will occur with employment cratering.
Also trying to fathom if the equalization point will be the 90's plateau or will it be 90's plateau or even the 70s? There appeared to be three flat spots in the graphs.
From the graphs you wonder how much of an undershoot their was. Incomes dropped back in the 90s. I believe it will be worse this time.
James
Dare I? I do.
The entire period shown is a bubble. Take the graph back fifty more years or one hundred more years. Or justify why households can afford more today than fifty years ago.
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