[quote=BGinRB][quote=FormerSanDiegan]
I am having a hard time figuring out why the prudent saver who is looking for a house for his/her family to live in is not being rewarded. [/quote]

Here, I’ll help you figure it out – plot price-to-income in 2000 vs 2008 for 92126-92131.

[/quote]

I would prefer that you bring the data to support your argument. I cannot find income broken down by zip code
However, here’s my stab at finding data related to your argument. I’ll take median prices averaged over 3 months(to reduce month-to-month noise) for 92126.

92126 Median prices:
Aug-Oct 2008 : Three month average of median price is 377K.

Aug-Oct 2000 : Three month average of median price is 236K.

About a 60% increase in prices.

I only have Census bureau income from 2000 and 2006. From 2000-2006 San Diego median family income rose by 34% .

So, since 2000 Prices in the first zip code you mentioned have risen about 60% compared to incomes at ~34%.

However, interest rates in 2000 were at 7.25% for 30-year fixed. Currently at 5.5%, a decline of about 25%

Guess what this means ?

We’re fairly close to the same percentage of income required to buy as was the case in 2000.

If we assume a 2% percent income growth that we didn’t account for in 2007-2008 and another 5% decline in prices since October, guess what ? We are at that point.

If you compare to 2005, you will find that owning in that zip code as a percentage of income is about half today (compared to 2005 peak).

We are very likely to see more downside in prices. However, I would not characterize the current situation as being unfavorable to the prudent savers who have been out of the RE market.