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If incomes are higher today than they were 10 years ago because of inflation, then homes are going to be higher as well, even if it's only 2%/yr.
 
[quote author="stepping_up" date=1216269630]If incomes are higher today than they were 10 years ago because of inflation, then homes are going to be higher as well, even if it's only 2%/yr.</blockquote>


Tongue in cheek is bypassing you. :-)



Inflation adjusted isn't turning a $140,000 townhome in 1998 or 1990 into a $300,000 townhome today. Or a $425,000 townhome today.



Inflation adjusted turns a $140,000 townhome from 1998 (also about the same NOMINAL price as 1990) into $180,000.
 
[quote author="stepping_up" date=1216269630]If incomes are higher today than they were 10 years ago because of inflation, then homes are going to be higher as well, even if it's only 2%/yr.</blockquote>


Maybe, maybe not. Maybe price inflation will translate only into higher interest rates, not higher home prices.
 
I'm showing census data in 2000 had OC median household income at $58,820 in 2000 and $70,232 in 2006, which would reflect 3%. Cited from OC Register article. It looks like median home price in 2000 was $318,010. 3%/yr, lock step with income, would put it at $402,845 today. I'm assuming that since it said home price and not house price, that it means condos and houses. Last I recall from OC register was the median home price had gone to $493K. So, only 18% further drop to hit 2000 median adjusted for inflation.



<a href="http://www.laalmanac.com/economy/ec37.htm">Median Home Price Source</a>



If I take Freedom's CS index of what our house would be priced at according to last month's average and drop that another 18%, it's a $40,500 paper loss. Again, this is all assuming we go back to 2000 prices. Ok, I feel a little better. This is what knife catchers do :)
 
Stepping... nice work!

I still believe that the market will overcorrect.... Hopefully THEN we can all purchase.

Still the prices aren't crazy expensive at 400k.

Take it easy

-bix
 
[quote author="stepping_up" date=1216272745]I'm showing census data in 2000 had OC median household income at $58,820 in 2000 and $70,232 in 2006, which would reflect 3%. Cited from OC Register article. It looks like median home price in 2000 was $318,010. 3%/yr, lock step with income, would put it at $402,845 today. I'm assuming that since it said home price and not house price, that it means condos and houses. Last I recall from OC register was the median home price had gone to $493K. So, only 18% further drop to hit 2000 median adjusted for inflation.



<a href="http://www.laalmanac.com/economy/ec37.htm">Median Home Price Source</a>



If I take Freedom's CS index of what our house would be priced at according to last month's average and drop that another 18%, it's a $40,500 paper loss. Again, this is all assuming we go back to 2000 prices. Ok, I feel a little better. This is what knife catchers do :)</blockquote>


Stepping- isn't the median SFR for OC 550k? is the 493k average for all condo and house? I think that house price varies per cities. Garden Grove and Santa Ana might reach the bottom before other areas. Irvine Westpark is still super high. 529K for a 2 bedroom condo. so it all depends on the area of which you are talking about.





http://lansner.freedomblogging.com/2008/07/16/oc-home-prices-rise-for-1st-time-in-7-months-in-june/



Sales down a whopping -18% on SFHs! 8)



Per DataQuick, Single Family Median Home Price:



2006 ~ Month End



$690,000 = Feb ~ Watts 15% ?In The Bag? for SFH

$695,000 = Mar

$705,000 = Apr

$705,000 = May

$700,000 = Jun

$699,000 = Jul ~ Watts revises forecast to 11%

$685,000 = Aug

$680,000 = Sep

$665,000 = Oct

$660,000 = Nov

$665,000 = Dec



2007 ~ Month End



$675,000 = Jan ~ Watts forecast 7% SFH

$675,000 = Feb

$695,000 = Mar

$720,000 = Apr

$695,000 = May

$734,000 = Jun ~ Peak of O.C. Housing Bubble

$718,000 = Jul

$710,000 = Aug

$655,000 = Sep

$650,000 = Oct

$655,000 = Nov

$600,000 = Dec



2008 ~ Weekly ~ Month End



$583,250 = Jan ~ Watts declares ?Pent up Demand?

$575.000 = Feb

$570,000 = Mar ~ Thoughtful declares ?bottom?

$555,000 = Apr

$537,000 = May

$550,000 = Jun ~ Watts apologizes ?I Got it Wrong?
 
[quote author="No_Such_Reality" date=1216277171]New census figures for 2007 are due out mid-August. Anybody got the Vegas over-under on household income for OC and Irvine?</blockquote>


when was the data gather? probably old news. i wonder how many Loan officer with 100k income jobs went missing after the subprime crash. i know about 5 personally and now all of them make around 30k-40k. but they were making well over 100k+ a year. 4 of them spend all their money. i only know of one who saved his.
 
[quote author="No_Such_Reality" date=1216270034][quote author="stepping_up" date=1216269630]If incomes are higher today than they were 10 years ago because of inflation, then homes are going to be higher as well, even if it's only 2%/yr.</blockquote>


Tongue in cheek is bypassing you. :-)



Inflation adjusted isn't turning a $140,000 townhome in 1998 or 1990 into a $300,000 townhome today. Or a $425,000 townhome today.



Inflation adjusted turns a $140,000 townhome from 1998 (also about the same NOMINAL price as 1990) into $180,000.</blockquote>


$188,148 :) Again, that's assuming that we take 1998 as the baseline. Perhaps I've misunderstood, but I thought that in 1998 homes were considered undervalued in OC.



Also, we're not considering interest rates being lower today than they were in '98. Whether they will stay that way is another story, but the interest rate does weigh in on the affordability. Very few people write a check for their house.
 
Yes JB, the $493 is a mix of condos and houses, but I think the 2000 figure I used as the baseline said it was for home prices, which is mix of the two. I don't believe that a median income merits stepping into an SFR without a considerable DP, so I think it makes sense if we are talking about income that it should reflect the entire housing stock. Not too too long ago starting with a condo was what a lot of people did. Now many people seem to think that they should be able to own an SFR right out of the gate without DP and/or above average earnings.
 
Look at three financial facets of homeownership:



http://www.teamworkhomes.com/crm/buyrent.pdf



Consumption and Saving are for real, investment depends on your view of future home appreciation.

Then you can understand why it make sense for some people wanting to be homeowner, others remain bitter renters.



Any poker players here on board? What are the odds that home price index return back to historic norms 6-7%, after all the mess is settled? Next question we might ask ourselves: what is the intrinsic value of the average home, using cost approach (new building cost of similar) and income approach (rent vs mortgage payment)?
 
[quote author="Informed_Decisions" date=1216282692]Look at three financial facets of homeownership:



http://www.teamworkhomes.com/crm/buyrent.pdf



Consumption and Saving are for real, investment depends on your view of future home appreciation.

Then you can understand why it make sense for some people wanting to be homeowner, others remain bitter renters.



Any poker players here on board? What are the odds that home price index return back to historic norms 6-7%, after all the mess is settled? Next question we might ask ourselves: what is the intrinsic value of the average home, using cost approach (new building cost of similar) and income approach (rent vs mortgage payment)?</blockquote>


Oh man, I think you're in the wrong place. Some people here may think I'm a bull, but even I'm a bear, just not an uber bear :) I'm not sure if these guys will bother, but if they do, they are going to eat your lunch. Beware.
 
[quote author="stepping_up" date=1216278804]



$188,148 :) Again, that's assuming that we take 1998 as the baseline. Perhaps I've misunderstood, but I thought that in 1998 homes were considered undervalued in OC.

</blockquote>


I guess it depends on what you think the fair "CA supplement" is.



If you look at the chart, you see that the long term P/I ratio nationally has been ~3, while in CA it has been ~4.5.



I expect that we will see these values again.



<img src="http://bp2.blogger.com/_pMscxxELHEg/SF__5UywZqI/AAAAAAAACMA/ry7RMSUg93A/s1600/HousePriceIncome2006.jpg" alt="" />



The question is whether CA retains its big supplement.

so if Irvine MHI is ~$85k (2006), then the median price (for all housing, condos + SFR) should go to $383k



for CM, $61k is $275k

for OC, $70k is $315k
 
[quote author="stepping_up" date=1216278804]$188,148 :) Again, that's assuming that we take 1998 as the baseline. Perhaps I've misunderstood, but I thought that in 1998 homes were considered undervalued in OC. </blockquote>


1998 had a median about 30% higher than 1995/1996. If that is still undervalued, it then demostrates how bad the over shoot will be during the correction.



Sadly, I suspect you will end up being right. I'm thinking the way out the Government is going to go with is to inflate the economy until things stabalize.
 
[quote author="jbatzmaru" date=1216277548][quote author="No_Such_Reality" date=1216277171]New census figures for 2007 are due out mid-August. Anybody got the Vegas over-under on household income for OC and Irvine?</blockquote>


when was the data gather? probably old news. i wonder how many Loan officer with 100k income jobs went missing after the subprime crash. i know about 5 personally and now all of them make around 30k-40k. but they were making well over 100k+ a year. 4 of them spend all their money. i only know of one who saved his.</blockquote>


I'm not sure if it'll show 2006 income or 2007 income. 2006 will show a further increase. I suspect 2007 willbe flat or slight increase which will show up. 2008 will show the decrease, but I don't know if we'll see those next year or the year after.
 
[quote author="No_Such_Reality" date=1216284334][quote author="stepping_up" date=1216278804]$188,148 :) Again, that's assuming that we take 1998 as the baseline. Perhaps I've misunderstood, but I thought that in 1998 homes were considered undervalued in OC. </blockquote>


1998 had a median about 30% higher than 1995/1996. If that is still undervalued, it then demostrates how bad the over shoot will be during the correction.



Sadly, I suspect you will end up being right. I'm thinking the way out the Government is going to go with is to inflate the economy until things stabalize.</blockquote>


To be honest, in 2000 RE seemed inexpensive to me. During the dot com boom, the bay area and my home town, Santa Cruz, RE went ballistic. I remember looking at a condo in Lake Forest for $135K in 2000. Mortgage would have been around $1,200, which is what 2 bedroom rents in the area were. The big reason I didn't do it is that I worked in tech, so I was really financially insecure.
 
California has a boom bust, RE makes you an instant millionaire mindset. Frankly, it's true, provided it doesn't destroy you.



In 2000, Silicon Valley was flush with easy cash, homes inflated to the rapid spike in income. The behavior you saw in Lake Forest is typical, rent = mortgage. Or like when I bought my place, rent > mortgage.
 
[quote author="stepping_up" date=1216284637]Freedom- I can't see the chart? what is MHI?</blockquote>


median household income.



I relinked the graph from calculated risk, don't know why the link failed.



here it is if it does it again:

"http://bp2.blogger.com/_pMscxxELHEg/SF__5UywZqI/AAAAAAAACMA/ry7RMSUg93A/s1600/HousePriceIncome2006.jpg"
 
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