Comments on: Median Income vs Median Home Price

By: The Elusive Housing “Fair Value” | Low Interest Student Loans

The Elusive Housing “Fair Value” | Low Interest Student Loans — Sat, 25 Apr 2009 01:20:26 +0000

[...] Median Income vs Median Home Price (mentioned yesterday) [...]

By: johoo

johoo — Fri, 24 Apr 2009 16:21:06 +0000

Some describe the plankton theory of housing market recovery- the market as a food chain . The low end — sells through to first time buyers, inventory drops, prices stablize and people build equity. Then, some time thereafter as they need to or want to they can trade up with their equty and higher life cycle earnings.

You can see that pattern beginning again in California. Inventory of low priced housing in better locations has become depleted over the past 6-9 months. Foreclosures appear to be clearing in some reasonable time frame. However the mid and high end just isn’t selling.

No one know if this is a temporary blip or the start of a stablizing market

By: linkfeedr » Blog Archive » The Elusive Housing “Fair Value” - RSS Indexer (beta)

Fri, 24 Apr 2009 12:28:03 +0000

[...] priced and over valued by traditional metrics. These include:Median Income vs Median Home Price (mentioned yesterday) Ownership Costs vs Renting Costs Market Value of Housing as a percentage of GDP Housing Inventory [...]

By: The Elusive Housing “Fair Value” | All about MICROSOFT

The Elusive Housing “Fair Value” | All about MICROSOFT — Fri, 24 Apr 2009 11:45:09 +0000

[...] Median Income vs Median Home Price (mentioned yesterday) [...]

By: The Elusive Housing “Fair Value” | The Big Picture

The Elusive Housing “Fair Value” | The Big Picture — Fri, 24 Apr 2009 11:28:37 +0000

[...] Median Income vs Median Home Price (mentioned yesterday) [...]

By: edhopper

edhopper — Thu, 23 Apr 2009 22:42:03 +0000

Yes. I was trying to point out that that thinking was abnormal and only held for the bubble years. In the previous 100 years the price/income ratios held.
Of course it only worked in the bubble years because lenders abandoned their normal requirements. They aren’t now and I doubt someone can get a loan for a house that is 6 or 7 times income. Therefore price to income will be the determining factor again.

By: DeDude

DeDude — Thu, 23 Apr 2009 22:15:54 +0000

Now part of the bubble creation was also due to the fact that the true monthly payments were concealed in all those the funny loans. So the median monthly payment that was shown to the borrower was false (or only true for a limited period), and therefore not backing a sustainable house price.

By: DeDude

DeDude — Thu, 23 Apr 2009 22:07:24 +0000

>>That was the NAR and Mortgage Brokers line during the Bubble. Only monthly payments matter. They were wrong<<

No they were actually right. That is why we got all those people to buy all those high priced houses. They only thought about monthly payments, not ratio of their income to price of the house. And if you in 2000 had used Shiller’s median income to median cost as a predictor for where house prices would be in 2007 you would have been dead wrong. The main reason that he may be right in the very long run is that in the very long run interest rates will return to where they were, and if they are the same they wont influence the equation.

By: edhopper

edhopper — Thu, 23 Apr 2009 21:39:17 +0000

“I am still not sure that the median income to median home price is such a great metric for predicting where house prices will have to go. The thing that really counts for purchase decisions is monthly payment. So you somehow have to take interest rates into account. Does anybody calculate a % of median monthly income to pay mortgage on median priced house. That may be more informative. However, that still does not account for the current problem that a lot of people cannot qualify for regular loans or for any loan at all.”

That was the NAR and Mortgage Brokers line during the Bubble. Only monthly payments matter. They were wrong. Robert Shiller has shown that median income is the best indicator for sustainable housing prices over the last 100 years. (the period he had good data for).
The chart shows a big decline is coming in the New york area.

By: Onlooker from Troy

Onlooker from Troy — Thu, 23 Apr 2009 20:49:06 +0000

Mannwich:

From the NYT article: “Some homeowners are still holding off on planned renovations in hopes that costs will go down further. ”

Yes indeed. The mindset is setting in and this will further depress prices. But it’s good to see people rewarded who didn’t chase houses and stuff in the mania, and patiently waited, saving their money.