[quote=barnaby33]So you are all comparing current pricing to peak insanity with loan products that aren’t available anymore and almost zero wage growth yet 15% cost of living inflation(using other posters number, not my own). Wow there is some VERY fuzzy math going on here. I’m lucky in that I’ve gotten a 3% raise each of the last two years. Most people who have a job, haven’t.
Anywho, congrats on finding that payment that is half what it was at peak! What was your name? I thought I heard Harry Howmuchamonth.
Josh[/quote]
Josh –
There is nothing fuzzy about this. Housing is the cheapest it has been on a relative basis by almost any fundamental metric (price to income, price to rent, payment to income and payment to rent ratios) since maybe the 1960s.
If you look at those fundamentals it reminds me of 2004, when clearly things had swung too far in terms of fundamentals. But, momentum was still up, psychology was still too positivs, and the economy was still creating jobs at a reasonable pace. So, we had to wait another year or two for some spark to set off the reversion to the mean.
Well, here we are in 2012 (almost) with price ratios that are well-below long-term averages, momentum is negative as is sentiment and the economy is not creating enough jobs. Very few can see a price ratio reversion to the long-term mean. There is no obvious mechanism to spark that reversion and the vast majority do not expect it.
This is the exact time when those that are contrarian should position or protect themselves against that reversion. It may not happen for another year or two, but it will happen.
