morekaos
Well-known member
Lansner has a good point here. I, being a big fan of historical precedence, think this deserves a look.
http://www.ocregister.com/articles/premium-355612-home-prices.html
A decade ago this spring, I dared to ask "Have Orange County home prices peaked?"
In the post-9/11-dot-com-bust economic malaise, local housing was a rare bright spot. It wasn't even yet the silly season for real estate, but home prices in 2002 had nearly doubled off the previous downturn's bottom. And they'd more or less double again before, well, you know.
Yet asking that question back in 2002 had numerous folks in and around the real estate world wondering if my marbles had been scrambled.
This wasn't a wild guess. It was based on a rather simple formula that had made me look pretty smart five years earlier.
In 1997, in my first week on the job as your Register business columnist, I had whipped up a real estate measure that I thought showed promise in the otherwise darkened housing game.
I compared what prices local homes were selling at, using National Association of Realtor data, to the overall U.S. median price. My "Orange Premium" more or less tracks what we pay extra to live here. See this as the "price of paradise."
I saw in 1997 that this premium had fallen far off its late 1980s peak -- when the local real estate trade had one of its frequent bouts of buying mania. My marker was now back to the levels that preceded that boom. So, I wrote in 1997 that it looked like Orange County housing was primed for a rebound.
Fast forward to 2002. Thanks to surging local home prices, this premium was up near those late 1980s highs: an Orange County home costing nearly what three homes at the national median price went for.
My column passed along the warning signal. I suggested that high housing costs would be a high economic hurdle to overcome.
It wasn't wrong. Just early.
I was reminded of 2002 recently when tracking a curious DataQuick measure -- a monthly estimate of the monthly house payment a recent homebuyer obtains.
That projected cost has been sliced in half. It's now down to $1,850 a month for April 2012 buyers, thanks to falling prices and historically cheap mortgage rates. And it hasn't been this low since fateful 2002.
With this curious anniversary in mind, I've revisited my premium math. What did I learn? It's still in warning mode.
For 2012's first quarter, using Realtors home-price data, we see Orange County's latest median price tag at $484,860 compared to $158,100 nationwide. So, one could buy one median-priced Orange County single-family house or 3.07 houses at the national median in the last quarter.
Yes, that's below the 3.41 Orange County home premium hit in the mania's peak of 2004. But it's also above the 2.7 peak seen in 1989.
And this ugly cycle's bottom ? a 2.58 premium in 2008?s fourth quarter -- was well above 1.84 trough of 1996.
With home prices running roughly one-third below their mid-mania peaks, have we still not wrung out enough excesses? Is more pain in store?
Well, since this premium has been such a good barometer, I can't bet against it!
Look at California population trends. In the 1970s and 1980s, the state's population grew by 9.8 million -- with migration to California from elsewhere equaling 55 percent of that growth. In the last two decades, however, California's population grew by 7.5 million -- but only 14 percent of our new neighbors moved here from other states or nations.
Sluggish population growth is not totally all the result of the region's pricey housing. But our shrinking migration suggests we've priced ourselves out of too many people's housing budgets.
Premium-priced products are simply out of fashion in this penny-pinching era.
Contact the writer: jlansner@ocregister.com or 949-777-6727
http://www.ocregister.com/articles/premium-355612-home-prices.html
A decade ago this spring, I dared to ask "Have Orange County home prices peaked?"
In the post-9/11-dot-com-bust economic malaise, local housing was a rare bright spot. It wasn't even yet the silly season for real estate, but home prices in 2002 had nearly doubled off the previous downturn's bottom. And they'd more or less double again before, well, you know.
Yet asking that question back in 2002 had numerous folks in and around the real estate world wondering if my marbles had been scrambled.
This wasn't a wild guess. It was based on a rather simple formula that had made me look pretty smart five years earlier.
In 1997, in my first week on the job as your Register business columnist, I had whipped up a real estate measure that I thought showed promise in the otherwise darkened housing game.
I compared what prices local homes were selling at, using National Association of Realtor data, to the overall U.S. median price. My "Orange Premium" more or less tracks what we pay extra to live here. See this as the "price of paradise."
I saw in 1997 that this premium had fallen far off its late 1980s peak -- when the local real estate trade had one of its frequent bouts of buying mania. My marker was now back to the levels that preceded that boom. So, I wrote in 1997 that it looked like Orange County housing was primed for a rebound.
Fast forward to 2002. Thanks to surging local home prices, this premium was up near those late 1980s highs: an Orange County home costing nearly what three homes at the national median price went for.
My column passed along the warning signal. I suggested that high housing costs would be a high economic hurdle to overcome.
It wasn't wrong. Just early.
I was reminded of 2002 recently when tracking a curious DataQuick measure -- a monthly estimate of the monthly house payment a recent homebuyer obtains.
That projected cost has been sliced in half. It's now down to $1,850 a month for April 2012 buyers, thanks to falling prices and historically cheap mortgage rates. And it hasn't been this low since fateful 2002.
With this curious anniversary in mind, I've revisited my premium math. What did I learn? It's still in warning mode.
For 2012's first quarter, using Realtors home-price data, we see Orange County's latest median price tag at $484,860 compared to $158,100 nationwide. So, one could buy one median-priced Orange County single-family house or 3.07 houses at the national median in the last quarter.
Yes, that's below the 3.41 Orange County home premium hit in the mania's peak of 2004. But it's also above the 2.7 peak seen in 1989.
And this ugly cycle's bottom ? a 2.58 premium in 2008?s fourth quarter -- was well above 1.84 trough of 1996.
With home prices running roughly one-third below their mid-mania peaks, have we still not wrung out enough excesses? Is more pain in store?
Well, since this premium has been such a good barometer, I can't bet against it!
Look at California population trends. In the 1970s and 1980s, the state's population grew by 9.8 million -- with migration to California from elsewhere equaling 55 percent of that growth. In the last two decades, however, California's population grew by 7.5 million -- but only 14 percent of our new neighbors moved here from other states or nations.
Sluggish population growth is not totally all the result of the region's pricey housing. But our shrinking migration suggests we've priced ourselves out of too many people's housing budgets.
Premium-priced products are simply out of fashion in this penny-pinching era.
Contact the writer: jlansner@ocregister.com or 949-777-6727