I love it when someone throws out some type of mathematical formula to demonstrate that prices should therefore be dropping by X percent. At some point I think common sense has got to be included in your calculation.
For example, the following metropolitan areas all have median household incomes of a similar amount, all around $45,000 to $47,000 per year:
Indianapolis
Dallas
Kansas City
Austin
Milwaukee
Cedar Rapids
Detroit
San Diego
Santa Barbara
By your reasoning, all of these areas should have median home prices around $300,000. But real estate prices always boil down to supply vs. demand, and the historical trend in San Diego generally has more demand than supply, and eventually we will probably have that again. Who on this forum wants to live in Dallas in the summer, or Detroit in the winter? Right now we do have too much supply in San Diego, so we’re in a down market, but I can guarantee that the median home price in San Diego and Santa Barbara will never drop to $300,000, and that the median home price in the non-California cities above will never rise to $300,000, at least in our lifetimes.
