One of the fundamentals you can figure out on your own for specific towns using some web data is median income to median housing price ratio. Rich and many other analysts consider median housing price at five times median income to be part of a dwonside or bust and seven times income to be the high side or a boom. If the median income (not the average but the guy in the middle with half making more and half making less) is 50k a year for a zip code, 250k for a house is a deal and 350k is a rip off because in the past it fluctuates between the two. You can go to SANDAG’s website and get estimates of median income by town, zip code, school boundaries, etc.
find the place you want to live, look at the median income (the real dollars, not the inflation adjusted 1999 numbers) and multiply it by 5 and also by 7, that is the historical range for houses there. The trick is, you may need a real estate veteran for the area to determine the median house for that area if you are unfamiliar with it, communities vary incredibly by median sq ft and median lot size. On Sandag, choose “current estimates”, the most recent data is 2006, new data may become available soon but incomes don’t skyrocket. San Diego city is at 61k, Carlsbad at 90k, paying anything more than 420k for the average house in S.D. is as risky as paying more than 630k in Carlsbad both were multiplied 7 x earnings. Keep in mind if you are looking at the smallest or the biggest house the fundamentals support more or less, real estate has more factors than just median, it’s just a basis. I am not in the RE industry, but ultimately you may need a local RE pro to help you determine if something is above or below average just be wary of the hype and find someone who didn’t jump in the biz in the last few years. You should refine it to zip code or even elementary school boundaries. Using countywide numbers quoted in the papers are interesting but if you are looking at buying, get specific.
Income went up 33% in S.D. city but 38% in Carlsbad from 2000 to 2006, housing went up much more in both, therefore the price increase violated the fundamentals of economics and have always returned, usually overcorrecting and going below the price supported by the fundamentals temporarily, and that my friend is the time to buy. Unfortunately I have but an SDSU education and never got better than a B in an economics class, so I could easily be wrong.
