Two other metrics you can use: historical HAI (housing affordability index) and per capita income/median housing price.

The latter dropped to 7 after the last two housing busts. The Chamber of Commerce predicts 2006 per capita income is $40,661. With 2% annual increase, in 3 years we would have per capita income of $43,149, and median house prices should be $302K. BTW, that Chamber report is awesome! They talk about the lack of good jobs, reliance on real estate, and risks of exotic loans. Check out the link.

How is HAI computed? CAR acknowledges its weaknesses, but says it measures the health of housing. From their website:
“The current underlying assumptions for calculating the HAI are a 20 percent downpayment, current market rates for taxes and insurance, and a 30 percent qualifying ratio.”

Historical HAI, off the C.A.R. website, 1994 – 2006
40%, 38, 38, 38, 38, 33, 24, 26, 22, 19, 12, 10

Before the last RE boom started, HAI was 33. To get back to 33, we need homes to fall to a price that 33% of the population can afford with 20% down, at current interest rates, paying no more than 30% of income. I will leave the calculation up to you math whizzes.

What should be the median price, based on a reversion to the mean in 2009, if HAI = 33, and median income = $43K?

My totally unscientific measure is that houses will still return to a level affordable by two average wage earners in any given area. Say, an elementary school teacher married to a policeman doing about the same — so somewhere in the neighborhood of $300K, which is still more expensive that most areas of the country.

Another unscientific measure is that the mortgage for a given area will be slightly more than rent. So, a house that now rents for $1600 in Mira Mesa would cost about $300K. Granted the houses I’ve seen rented for $1600 in Mira Mesa are not places you would want to raise kids.

How many $100K annual wage earners in SD can save $80,000?

Anyways, $360,000 (at 6.75%) is a lot different than $600,000. Back when houses really were selling at $360,000 the interest rates were higher.

Renting out rooms to meet mortgage payments is a common thing, especially in immigrant households. If you drive around in the evening and see cars parked everywhere, then you can assume that people are renting out rooms, even garages. That phenomenon is best illustrated in Clairemont and Mira Mesa.

The best neighborhoods are places where cars are parked inside.

I know an immigrant family (really nice people) who lives about 15 inside a 4 bedroom house. No wonder they can afford the mortgage and a Mercedes.

Young professional do it too in order to “invest” in the housing market. One of my friends bought a 2bd condo with I/O loan. He has a roomate that pays about $700/month. But he’ll be in trouble once his loan resets. But he can’t/won’t sell now because the market is down.

Selling is no simple task now; buyer don’t want to buy a messy occupied unit. You have to move out and incur more housing costs while your home sits on the market.

Our HOA prohibits trailers, RVs or boats parked on the street. This area of townhomes has 1 car garages, so there are a lot of cars parked on the street, but each home has only one family in my neighborhood. When we rented in a nicer area, while we were building our house in 2003-2005, the neighbors complained when my brother parked his car outside for a week. No cars were allowed on the street, garage doors had to be closed. But those homes had large driveways, so excess cars parked in the driveway, not the street. Boats, RVs, and trailers were kept offsite somewhere.

The car parking and RV eyesore is what kept me from buying in Rancho Penasquitos.

All in all, it comes down to how big the driveways and garages are. Most people use their garage for storage plus 1 car. The 2nd and 3rd cars go in the driveway if you are on a large property, or on the street if you are in a lower income property. If you cannot afford RV or boat storage, you leave that stuff on your street.