In the first I include federal inflation stats, HUD fair market for 2 bedroom apartments, and the increase YOY in the fair market.
As you can see, the percent increase in what is considered “fair market” climbed by a significant amount over reported inflation.
Perhaps more shocking is to compare this to household median incomes. I couldn’t find reliable data for anything past 2005, but that covers most of the bubble years so I think it demonstrates my point.
Median Household Income
2000 — $58,820
2005 — $65,823
Rental Increases if They Tracked Inflation
2000 $891
2005 $1044.69
% Increase – 17%
In summation, if government data can be trusted, rental costs increased at more than double the rate of household incomes in Orange County from 2000-2005.
It seems to me that in a rational market even rentals should be tied to local incomes. All I can gather is there are two options I see. 1. Rental prices were a bargain in 2000 and they are normal today. 2.Rents were fairly valued in 2000 and are overpriced today. Any other possibilities?
I don’t really trust the government to accurately report inflation. That’s why I shared the income to rental cost info as well.
What do you think? Am I crazy? I don’t profess to be an expert. I am a student who has come to be educated by the Piggs. Please help enlighten me. I ask this question to formulate my own strategy to eventually buy at the market bottom. I’m just looking to formulate a strategy to hopefully buy as close to the bottom as I can get.
