Comments on: US Existing House Price / Median Family Income http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Sat, 21 Nov 2009 19:59:24 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: nrigney http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-148885 nrigney Fri, 27 Feb 2009 17:19:07 +0000 http://www.ritholtz.com/blog/?p=19567#comment-148885 I did not read every comment, sorry if this is repetitive information. Someone asked what changed around 1997 to drive prices up relative to income. Consider that the vast majority of purchases require financing, so availability of financing determines "affordability." Factors involved in home financing: Income (and methods of verification,) Debt, Credit Worthiness, Loan Products, and Underwriting Standards. If income, debt and credit scores all remained constant (or decreased due to increased debt,) the obvious variables are loan products (ARM/Fixed, term length, Pay-option, interest rate,) underwriting standards and income verification methods. Plenty of arguments out there about why these changed, I'll stay out of that for now. Using my logic (flawed or not,) if loan products and underwriting standards were to remain constant, home values would only fluctuate due to changes in levels of income, debt and credit worthiness. That seems valid to me, but the need/ability to refinance would decrease. In turn, the mortgage industry would not see much growth and former employees of mortgage companies would have to find new careers. Trading stability for potential growth (and decline.) Which would you rather have in a financial system? I did not read every comment, sorry if this is repetitive information. Someone asked what changed around 1997 to drive prices up relative to income. Consider that the vast majority of purchases require financing, so availability of financing determines “affordability.”

Factors involved in home financing: Income (and methods of verification,) Debt, Credit Worthiness, Loan Products, and Underwriting Standards. If income, debt and credit scores all remained constant (or decreased due to increased debt,) the obvious variables are loan products (ARM/Fixed, term length, Pay-option, interest rate,) underwriting standards and income verification methods. Plenty of arguments out there about why these changed, I’ll stay out of that for now.

Using my logic (flawed or not,) if loan products and underwriting standards were to remain constant, home values would only fluctuate due to changes in levels of income, debt and credit worthiness. That seems valid to me, but the need/ability to refinance would decrease. In turn, the mortgage industry would not see much growth and former employees of mortgage companies would have to find new careers. Trading stability for potential growth (and decline.) Which would you rather have in a financial system?

]]> By: Darkness http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147494 Darkness Sat, 21 Feb 2009 16:45:42 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147494 >Materials and codes have improved greatly in many areas since 1950s. The codes have improved and then in our area been gutted again by the building industry. I could send you a photomontage of ice whales on the brand new mcmansions around here where they argue successfully that the R value of the paint (I'm not joking) counts enough that they can ditch the 6 inch exterior wall minimum rule. As to materials. Not a chance. I'll put my solid wood tongue and groove roof decking up against even the most modern plywood any day for material quality. Of course the decking can always be replaced along with the roof, but the homeowner better not slack a day on calling a roofer as the water spreads. Even though given the crazy rooflines on the house they are going to have to send the kids to community college instead of university to afford the repair. >Materials and codes have improved greatly in many areas since 1950s.

The codes have improved and then in our area been gutted again by the building industry. I could send you a photomontage of ice whales on the brand new mcmansions around here where they argue successfully that the R value of the paint (I’m not joking) counts enough that they can ditch the 6 inch exterior wall minimum rule.

As to materials. Not a chance. I’ll put my solid wood tongue and groove roof decking up against even the most modern plywood any day for material quality. Of course the decking can always be replaced along with the roof, but the homeowner better not slack a day on calling a roofer as the water spreads. Even though given the crazy rooflines on the house they are going to have to send the kids to community college instead of university to afford the repair.

]]> By: try2bamused http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147447 try2bamused Sat, 21 Feb 2009 05:59:54 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147447 Wow, look at that chart. I knew the 70's were grim! Watergate. Alice Cooper. The SLA. Seedy rip-off Jamaican. A double-digit SPX. It was all real! Wow, look at that chart. I knew the 70’s were grim! Watergate. Alice Cooper. The SLA. Seedy rip-off Jamaican. A double-digit SPX. It was all real!

]]> By: gpknopp http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147401 gpknopp Fri, 20 Feb 2009 23:59:41 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147401 "Homes are now more affordable than ever." - The National Association of Realtors “Homes are now more affordable than ever.”
- The National Association of Realtors

]]> By: R. Timm http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147399 R. Timm Fri, 20 Feb 2009 23:43:56 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147399 @ Darkness: I think your quality argument is not really valid. Materials and codes have improved greatly in many areas since 1950s. Home building technology today allows for better insulation,less windstorm damage and higher quality electrical wiring. There are undoubtedly some recent construction that is sub par, but in general a home today has better fit and finish than 50 years ago. I agree the rental market does have an impact on home prices. There may be some impact however on rising income inequality on the graph above. @ Darkness: I think your quality argument is not really valid. Materials and codes have improved greatly in many areas since 1950s. Home building technology today allows for better insulation,less windstorm damage and higher quality electrical wiring. There are undoubtedly some recent construction that is sub par, but in general a home today has better fit and finish than 50 years ago.

I agree the rental market does have an impact on home prices. There may be some impact however on rising income inequality on the graph above.

]]> By: DeDude http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147384 DeDude Fri, 20 Feb 2009 22:00:03 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147384 After reading what the white house said, I do not see any indication that they took nationalization of the table. They just say they don’t like it. Delicate wording since they know it eventually will have to happen one way or another. After reading what the white house said, I do not see any indication that they took nationalization of the table. They just say they don’t like it. Delicate wording since they know it eventually will have to happen one way or another.

]]> By: MRegan http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147357 MRegan Fri, 20 Feb 2009 21:08:44 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147357 Mathman- I have been following the Argentine story and know alot about the water issues in Arequipa, Peru. Don't know what to say other than 'crap'. Mathman-

I have been following the Argentine story and know alot about the water issues in Arequipa, Peru. Don’t know what to say other than ‘crap’.

]]> By: Andy Tabbo http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147352 Andy Tabbo Fri, 20 Feb 2009 21:01:27 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147352 Today and Monday will prove to be critical days technically speaking. For the bulls... "If" from the November lows we're witnessing a monster "Flat Correction" and now from the the 940 highs we're in the middle of a very pretty textbook ZigZag B Wave, then we should end this B wave today or Monday. Any more downside...any more time wasting away at the lows will be ominous. The bull case for a strong C Wave higher is definitely running out of time.... If the bulls can put in some kind of bottoming action between today and Monday then perhaps we will avert disaster for at least a few weeks..... If I were a technician working for the PPT I would craft some sort of miracle bailout bill this weekend and announce it on Sunday night before Globex opens...causing a limit up move on Monday...... Things working for bulls....weaker DX and gold finally hitting that psychologically important 1000 level.... Today and Monday will prove to be critical days technically speaking.

For the bulls…

“If” from the November lows we’re witnessing a monster “Flat Correction” and now from the the 940 highs we’re in the middle of a very pretty textbook ZigZag B Wave, then we should end this B wave today or Monday. Any more downside…any more time wasting away at the lows will be ominous.

The bull case for a strong C Wave higher is definitely running out of time….

If the bulls can put in some kind of bottoming action between today and Monday then perhaps we will avert disaster for at least a few weeks…..

If I were a technician working for the PPT I would craft some sort of miracle bailout bill this weekend and announce it on Sunday night before Globex opens…causing a limit up move on Monday……

Things working for bulls….weaker DX and gold finally hitting that psychologically important 1000 level….

]]> By: mathman http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147351 mathman Fri, 20 Feb 2009 21:01:16 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147351 Widening our view and looking ahead some it's become ever more clear that none of this is going to matter much in the not-too-distant future. For example: Tomgram: Nobody Knows How Dry We Are http://tomdispatch.com/ Widening our view and looking ahead some it’s become ever more clear that none of this is going to matter much in the not-too-distant future. For example:

Tomgram: Nobody Knows How Dry We Are

http://tomdispatch.com/

]]> By: AGG http://www.ritholtz.com/blog/2009/02/us-existing-house-price-median-family-income/comment-page-2/#comment-147340 AGG Fri, 20 Feb 2009 20:35:34 +0000 http://www.ritholtz.com/blog/?p=19567#comment-147340 Marcus Aurelius is right. This ain't ovah. Marcus Aurelius is right.
This ain’t ovah.

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