Undervalued in 2000? If we believe the GS report with a median of $375k that would make the median home 7x the median income. I’m not sure how they as so called economists can make the assumption that this is fiscally a good thing. It seems to me that median homes should be 3x the median income or in line with rents.
7x the median income was near the last low.
Regarding median price to be 3X median income.
I will explain why that notion is completely bogus, since it crops up here occasionally. The reason is that it applies a microeconomic principle to a macroeconomic statistic.
It is correct that a home buyer can typically afford a home priced at 3-4 x their income using typical standards. However, consider that in Southern California about 50% of the population rents. The other 50% live in a mix of houses and condos. Therefore, it is more likely that the 70th or 75th percentile in income is likely to line up with the median price of a single family home. Recently it was as high as the 90th percentile. At the last low in San Diego in the mid 1990s it approached the 60th percentile, considerably above the median.
Also, remember that median incomes include those who are transitioning between careers, working part time, underemployed, going to school, etc. Those who buy homes are typically (but perhaps not in recent years) in a position with more stable income and a group that naturally selects out people in transitory jobs.
