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November 15, 2007 at 9:22 AM #10908November 15, 2007 at 9:30 AM #99742
djrobsd
ParticipantI should have further elaborated before clicking the post button…
They say to bring housing in line with the price/rent ratio, San Diego needs to drop 34%. I would say, they are dead on with that number. My house rents for only $1650, but I paid $345,000 for it, a 34% drop would bring it down to $227,000, and even with 100% financing, that makes the payment much closer to the rent, @ 7% mortgage would be $1324 a month, plus $208 in property taxes, $131 in HOA, makes it almost dead on with the rent I’m collecting right now. On the other hand, they are assuming in this article that interest rates won’t go back up to their original levels back in the 80s and 90s. π If they go back up, the price correction would have to be MUCH higher.
November 15, 2007 at 9:30 AM #99818djrobsd
ParticipantI should have further elaborated before clicking the post button…
They say to bring housing in line with the price/rent ratio, San Diego needs to drop 34%. I would say, they are dead on with that number. My house rents for only $1650, but I paid $345,000 for it, a 34% drop would bring it down to $227,000, and even with 100% financing, that makes the payment much closer to the rent, @ 7% mortgage would be $1324 a month, plus $208 in property taxes, $131 in HOA, makes it almost dead on with the rent I’m collecting right now. On the other hand, they are assuming in this article that interest rates won’t go back up to their original levels back in the 80s and 90s. π If they go back up, the price correction would have to be MUCH higher.
November 15, 2007 at 9:30 AM #99837djrobsd
ParticipantI should have further elaborated before clicking the post button…
They say to bring housing in line with the price/rent ratio, San Diego needs to drop 34%. I would say, they are dead on with that number. My house rents for only $1650, but I paid $345,000 for it, a 34% drop would bring it down to $227,000, and even with 100% financing, that makes the payment much closer to the rent, @ 7% mortgage would be $1324 a month, plus $208 in property taxes, $131 in HOA, makes it almost dead on with the rent I’m collecting right now. On the other hand, they are assuming in this article that interest rates won’t go back up to their original levels back in the 80s and 90s. π If they go back up, the price correction would have to be MUCH higher.
November 15, 2007 at 9:30 AM #99848djrobsd
ParticipantI should have further elaborated before clicking the post button…
They say to bring housing in line with the price/rent ratio, San Diego needs to drop 34%. I would say, they are dead on with that number. My house rents for only $1650, but I paid $345,000 for it, a 34% drop would bring it down to $227,000, and even with 100% financing, that makes the payment much closer to the rent, @ 7% mortgage would be $1324 a month, plus $208 in property taxes, $131 in HOA, makes it almost dead on with the rent I’m collecting right now. On the other hand, they are assuming in this article that interest rates won’t go back up to their original levels back in the 80s and 90s. π If they go back up, the price correction would have to be MUCH higher.
November 15, 2007 at 9:30 AM #99855djrobsd
ParticipantI should have further elaborated before clicking the post button…
They say to bring housing in line with the price/rent ratio, San Diego needs to drop 34%. I would say, they are dead on with that number. My house rents for only $1650, but I paid $345,000 for it, a 34% drop would bring it down to $227,000, and even with 100% financing, that makes the payment much closer to the rent, @ 7% mortgage would be $1324 a month, plus $208 in property taxes, $131 in HOA, makes it almost dead on with the rent I’m collecting right now. On the other hand, they are assuming in this article that interest rates won’t go back up to their original levels back in the 80s and 90s. π If they go back up, the price correction would have to be MUCH higher.
November 15, 2007 at 10:34 AM #99782robson
ParticipantThat 34% correction is composed of a 10% increase in rents and a 24% decrease in home values. As far as interest rates, they say “Today average real rates for all mortgages, fixed and adjustable, stand at 4.7% (adjusted for inflation), which is roughly in line with the long-term average.” I wonder just how “rough” that average is, and why they would think it would trend below the average, rise back up to the average and then simply stop.
November 15, 2007 at 10:34 AM #99861robson
ParticipantThat 34% correction is composed of a 10% increase in rents and a 24% decrease in home values. As far as interest rates, they say “Today average real rates for all mortgages, fixed and adjustable, stand at 4.7% (adjusted for inflation), which is roughly in line with the long-term average.” I wonder just how “rough” that average is, and why they would think it would trend below the average, rise back up to the average and then simply stop.
November 15, 2007 at 10:34 AM #99878robson
ParticipantThat 34% correction is composed of a 10% increase in rents and a 24% decrease in home values. As far as interest rates, they say “Today average real rates for all mortgages, fixed and adjustable, stand at 4.7% (adjusted for inflation), which is roughly in line with the long-term average.” I wonder just how “rough” that average is, and why they would think it would trend below the average, rise back up to the average and then simply stop.
November 15, 2007 at 10:34 AM #99888robson
ParticipantThat 34% correction is composed of a 10% increase in rents and a 24% decrease in home values. As far as interest rates, they say “Today average real rates for all mortgages, fixed and adjustable, stand at 4.7% (adjusted for inflation), which is roughly in line with the long-term average.” I wonder just how “rough” that average is, and why they would think it would trend below the average, rise back up to the average and then simply stop.
November 15, 2007 at 10:34 AM #99895robson
ParticipantThat 34% correction is composed of a 10% increase in rents and a 24% decrease in home values. As far as interest rates, they say “Today average real rates for all mortgages, fixed and adjustable, stand at 4.7% (adjusted for inflation), which is roughly in line with the long-term average.” I wonder just how “rough” that average is, and why they would think it would trend below the average, rise back up to the average and then simply stop.
November 15, 2007 at 10:49 AM #99804robson
Participant1 other thing i noticed was the longterm p/r they cite is a 15 year average. i imagine this graph to look a lot like Rich’s price/income graphs in “evidence of a housing bubble.” A 15 year average captures 1 cycle of p/r downswing and upswing successfully, however, in the case of the last 15 years it captures a normal downswing (92-98, 05-07) and an enormous upswing (98-05). Therefore, the “longterm” p/r of the last 15 years is higher than the actual longterm p/r of say, the last 45 years. This means the needed 34% correction is probably a bit higher.
November 15, 2007 at 10:49 AM #99881robson
Participant1 other thing i noticed was the longterm p/r they cite is a 15 year average. i imagine this graph to look a lot like Rich’s price/income graphs in “evidence of a housing bubble.” A 15 year average captures 1 cycle of p/r downswing and upswing successfully, however, in the case of the last 15 years it captures a normal downswing (92-98, 05-07) and an enormous upswing (98-05). Therefore, the “longterm” p/r of the last 15 years is higher than the actual longterm p/r of say, the last 45 years. This means the needed 34% correction is probably a bit higher.
November 15, 2007 at 10:49 AM #99898robson
Participant1 other thing i noticed was the longterm p/r they cite is a 15 year average. i imagine this graph to look a lot like Rich’s price/income graphs in “evidence of a housing bubble.” A 15 year average captures 1 cycle of p/r downswing and upswing successfully, however, in the case of the last 15 years it captures a normal downswing (92-98, 05-07) and an enormous upswing (98-05). Therefore, the “longterm” p/r of the last 15 years is higher than the actual longterm p/r of say, the last 45 years. This means the needed 34% correction is probably a bit higher.
November 15, 2007 at 10:49 AM #99909robson
Participant1 other thing i noticed was the longterm p/r they cite is a 15 year average. i imagine this graph to look a lot like Rich’s price/income graphs in “evidence of a housing bubble.” A 15 year average captures 1 cycle of p/r downswing and upswing successfully, however, in the case of the last 15 years it captures a normal downswing (92-98, 05-07) and an enormous upswing (98-05). Therefore, the “longterm” p/r of the last 15 years is higher than the actual longterm p/r of say, the last 45 years. This means the needed 34% correction is probably a bit higher.
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