zk, anybody who claims “this time is different” carries a big burden of proof. Docteur thinks it is different this time. In his view, housing cannot drop to the historic baseline because it would violate his principle of replacement cost. I addressed the weakness in his argument earlier. I think he believes his own neighborhood is fairly immune from price drops. Perhaps the exclusive La Jolla and Rancho Santa Fe homes are less prone to price drops, but Carmel Valley is just another tract home subdivision, that will fall with everything else. Prices have dropped there already, if you check the Solds, and there is one NOD over there.
It would be interesting to do an analysis of historic pricing by neighborhood or location, so we could improve our analysis of specific homes. Right now, all I know is that the baseline is a price/income ratio of 7. Is it higher for certain neighborhoods, lower for others? The answer is likely Yes. The $3 mil and up homes are not dependent on wages at all, but more on the stock market. They have nothing to do with median income. But anything $2 mil and below is wage dependent, right, so we could analyze it by multiple of wages.
Perhaps Carlsbad is typically 8 x wages, while Mira Mesa is 4 x median wages. With lower wage earners in Mira Mesa, and cheaper housing over there, it makes sense that historically their homes are priced at a lower multiple of per capita income.
