There’s no point talking about ratios of home price to income or home price to rent. You are ignoring a big factor – interest rates. $59,000 income will support higher home prices with 6% rates than with 8% rates. A more meaningful measure is the ratio of a median home payment to a median family income. It was historically around 15% in areas with lots of free land and maybe 25% in highly desirable places with limited land like San Diego or Bay Area. (Before the age of creative financing, it couldn’t even climb much higher than 28% because you couldn’t qualify for a mortgage if your payments were more than 28% of your income!)
2000-2001 prices in Temecula are possible but improbable. Interest rates are lower and incomes are much higher today than in 2001. Overbuilding won’t matter much because San Diego will always be there to deal with excess inventory.
