"If you own a home in a former bubble region like California or southern Florida, there's bad news… and really bad news. But the really bad news is that, even after a year of misery and falling prices, homes in many of these regions still aren't cheap. They remain wildly overvalued compared to average personal incomes.
How far?
Try around a third in Florida and Arizona -- and closer to 40% in California.
Median prices in California peaked in 2006 at 13.3 times per capita incomes. Hard to believe, but true. They may be down now to about 11.1 times.
But that's still way above the ground. Throughout most of the 80s and 90s they ranged between six and seven times incomes.
Just to get down to seven times incomes, prices would have to fall 37% tomorrow."
Here's a nice video of treasury secretary Paulson saying the worst is not over, it's just beggining. As Robin would say "Zoinkers".
2 comments:
Ok X, explain something to me. The article says that, historically, houses in Cali cost 7x the family income. How does that work out? If that were true, I could well afford the $775,000 house that I posted the URL to in the previous thread. When I add things up, that house payment would be roughly $3400/mo. without taxes and insurance at the current interest rate. I certainly can't swing that. Also, interest rates have been a lot higher in the past, so the percentage of income going to a house payment would have been relatively higher. What am I missing here?
I found that kinda puzzling myself. There is no telling where they are getting their data. The latest CAR chart I saw had the IE at about 7x median income and the average being between 2x and 3x income. According to the CAR report we were about 2.5- 3 times higher than our average.
Hey I can afford a home over a million using their formula. I'm sweating bullets thinking of spending $400k
$3400, is with 20% down AND you'd need a rate at about 5.5%. Not easy to find a rate that low on a loan that high. I have not seen any banks raise the jumbo limit yet so those loans are still closer to 6.5%.
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