Home › Forums › Housing › Fed empties the Armory, expends all ammo, housing has bottomed. SD RE will cost more in August of 09 than it does now.
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December 17, 2008 at 7:56 AM #317175December 17, 2008 at 8:06 AM #316701XBoxBoyParticipant
[quote=esmith]How about we stop panicking and try to do some level-headed analysis.[/quote]
Nah the problem with that approach is that people are not level-headed and rational. If you learn nothing else from this recent housing bubble, learn that people are not rational, and that all economics that sits on top of the belief that people are rational acting agents is faulty.
Instead understand that as problems get harder to figure out, as the analysis gets tougher, we as people give up and rely on what our friends, neighbors and coworkers think. If our neighbors think that house prices only go up, then we believe that house prices only go up too. If your a CEO of a huge investment bank and if the other CEO’s at your club think that credit default swaps spread risk around making the world more safe, then you too believe that. If you’re the chairman of the federal reserve and all your academic buddies believe that lowering interest rates, printing money, and encouraging everyone to take on debt will solve all your problems, well then that’s what you believe too.
There’s no place for rational analysis here. It too much work! Much easier to just rely on what others think.
XBoxBoy
December 17, 2008 at 8:06 AM #317052XBoxBoyParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.[/quote]
Nah the problem with that approach is that people are not level-headed and rational. If you learn nothing else from this recent housing bubble, learn that people are not rational, and that all economics that sits on top of the belief that people are rational acting agents is faulty.
Instead understand that as problems get harder to figure out, as the analysis gets tougher, we as people give up and rely on what our friends, neighbors and coworkers think. If our neighbors think that house prices only go up, then we believe that house prices only go up too. If your a CEO of a huge investment bank and if the other CEO’s at your club think that credit default swaps spread risk around making the world more safe, then you too believe that. If you’re the chairman of the federal reserve and all your academic buddies believe that lowering interest rates, printing money, and encouraging everyone to take on debt will solve all your problems, well then that’s what you believe too.
There’s no place for rational analysis here. It too much work! Much easier to just rely on what others think.
XBoxBoy
December 17, 2008 at 8:06 AM #317093XBoxBoyParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.[/quote]
Nah the problem with that approach is that people are not level-headed and rational. If you learn nothing else from this recent housing bubble, learn that people are not rational, and that all economics that sits on top of the belief that people are rational acting agents is faulty.
Instead understand that as problems get harder to figure out, as the analysis gets tougher, we as people give up and rely on what our friends, neighbors and coworkers think. If our neighbors think that house prices only go up, then we believe that house prices only go up too. If your a CEO of a huge investment bank and if the other CEO’s at your club think that credit default swaps spread risk around making the world more safe, then you too believe that. If you’re the chairman of the federal reserve and all your academic buddies believe that lowering interest rates, printing money, and encouraging everyone to take on debt will solve all your problems, well then that’s what you believe too.
There’s no place for rational analysis here. It too much work! Much easier to just rely on what others think.
XBoxBoy
December 17, 2008 at 8:06 AM #317115XBoxBoyParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.[/quote]
Nah the problem with that approach is that people are not level-headed and rational. If you learn nothing else from this recent housing bubble, learn that people are not rational, and that all economics that sits on top of the belief that people are rational acting agents is faulty.
Instead understand that as problems get harder to figure out, as the analysis gets tougher, we as people give up and rely on what our friends, neighbors and coworkers think. If our neighbors think that house prices only go up, then we believe that house prices only go up too. If your a CEO of a huge investment bank and if the other CEO’s at your club think that credit default swaps spread risk around making the world more safe, then you too believe that. If you’re the chairman of the federal reserve and all your academic buddies believe that lowering interest rates, printing money, and encouraging everyone to take on debt will solve all your problems, well then that’s what you believe too.
There’s no place for rational analysis here. It too much work! Much easier to just rely on what others think.
XBoxBoy
December 17, 2008 at 8:06 AM #317190XBoxBoyParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.[/quote]
Nah the problem with that approach is that people are not level-headed and rational. If you learn nothing else from this recent housing bubble, learn that people are not rational, and that all economics that sits on top of the belief that people are rational acting agents is faulty.
Instead understand that as problems get harder to figure out, as the analysis gets tougher, we as people give up and rely on what our friends, neighbors and coworkers think. If our neighbors think that house prices only go up, then we believe that house prices only go up too. If your a CEO of a huge investment bank and if the other CEO’s at your club think that credit default swaps spread risk around making the world more safe, then you too believe that. If you’re the chairman of the federal reserve and all your academic buddies believe that lowering interest rates, printing money, and encouraging everyone to take on debt will solve all your problems, well then that’s what you believe too.
There’s no place for rational analysis here. It too much work! Much easier to just rely on what others think.
XBoxBoy
December 17, 2008 at 8:27 AM #316711(former)FormerSanDieganParticipant[quote=4plexowner]
People who have $70K in the bank are not interested in buying a median home which at this point means a POS SFR in Clairemont or a condo/townhouse in some other “happening” part of town[/quote]
Interesting …
What’s funny about this is that SFRs in Clairemont have always roughly tracked the median price.
Also, the income required to buy these houses using traditional DTI ratios at the last housing bottom (circa 1996) was the equivalent of 1.5 times the median household income.
Today, a person with about 1.1x the median household income can buy a house in Clairemont.
Median household income : 60,900
CLairemont House : 375 K
Total PITI = 2039
(Loan @ 5.5%, 20% down : P&I = 1589; Taxes & interest : 450)Assuming PITI = 36% of income, Clairemont is affordable to someone making 1.1x the median household income.
December 17, 2008 at 8:27 AM #317062(former)FormerSanDieganParticipant[quote=4plexowner]
People who have $70K in the bank are not interested in buying a median home which at this point means a POS SFR in Clairemont or a condo/townhouse in some other “happening” part of town[/quote]
Interesting …
What’s funny about this is that SFRs in Clairemont have always roughly tracked the median price.
Also, the income required to buy these houses using traditional DTI ratios at the last housing bottom (circa 1996) was the equivalent of 1.5 times the median household income.
Today, a person with about 1.1x the median household income can buy a house in Clairemont.
Median household income : 60,900
CLairemont House : 375 K
Total PITI = 2039
(Loan @ 5.5%, 20% down : P&I = 1589; Taxes & interest : 450)Assuming PITI = 36% of income, Clairemont is affordable to someone making 1.1x the median household income.
December 17, 2008 at 8:27 AM #317103(former)FormerSanDieganParticipant[quote=4plexowner]
People who have $70K in the bank are not interested in buying a median home which at this point means a POS SFR in Clairemont or a condo/townhouse in some other “happening” part of town[/quote]
Interesting …
What’s funny about this is that SFRs in Clairemont have always roughly tracked the median price.
Also, the income required to buy these houses using traditional DTI ratios at the last housing bottom (circa 1996) was the equivalent of 1.5 times the median household income.
Today, a person with about 1.1x the median household income can buy a house in Clairemont.
Median household income : 60,900
CLairemont House : 375 K
Total PITI = 2039
(Loan @ 5.5%, 20% down : P&I = 1589; Taxes & interest : 450)Assuming PITI = 36% of income, Clairemont is affordable to someone making 1.1x the median household income.
December 17, 2008 at 8:27 AM #317125(former)FormerSanDieganParticipant[quote=4plexowner]
People who have $70K in the bank are not interested in buying a median home which at this point means a POS SFR in Clairemont or a condo/townhouse in some other “happening” part of town[/quote]
Interesting …
What’s funny about this is that SFRs in Clairemont have always roughly tracked the median price.
Also, the income required to buy these houses using traditional DTI ratios at the last housing bottom (circa 1996) was the equivalent of 1.5 times the median household income.
Today, a person with about 1.1x the median household income can buy a house in Clairemont.
Median household income : 60,900
CLairemont House : 375 K
Total PITI = 2039
(Loan @ 5.5%, 20% down : P&I = 1589; Taxes & interest : 450)Assuming PITI = 36% of income, Clairemont is affordable to someone making 1.1x the median household income.
December 17, 2008 at 8:27 AM #317199(former)FormerSanDieganParticipant[quote=4plexowner]
People who have $70K in the bank are not interested in buying a median home which at this point means a POS SFR in Clairemont or a condo/townhouse in some other “happening” part of town[/quote]
Interesting …
What’s funny about this is that SFRs in Clairemont have always roughly tracked the median price.
Also, the income required to buy these houses using traditional DTI ratios at the last housing bottom (circa 1996) was the equivalent of 1.5 times the median household income.
Today, a person with about 1.1x the median household income can buy a house in Clairemont.
Median household income : 60,900
CLairemont House : 375 K
Total PITI = 2039
(Loan @ 5.5%, 20% down : P&I = 1589; Taxes & interest : 450)Assuming PITI = 36% of income, Clairemont is affordable to someone making 1.1x the median household income.
December 17, 2008 at 8:29 AM #316716(former)FormerSanDieganParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.
– What’s the median house price in San Diego county?
– Knowing that you can get a 5% 30-year fixed mortgage, what would be your total monthly payment if you bought a median house today? Let’s say 20% down. Include property tax and downpayment opportunity loss. You can use this source to check historical mortgage rates and CD rates:
http://research.stlouisfed.org/fred2/series/WCD6M?cid=121
http://research.stlouisfed.org/fred2/series/MORTG?cid=114– When was the last time houses were this cheap?
– What if we use inflation-adjusted dollars?[/quote]
I don’t know if we are at the bottom in pricing, but I have to agree with esmith on the point that housing is near generational lows in San Diego in terms of affordability, since it is obvious that houses are more affrdable than they have been in my adult lifetime (I’m in my mid-40’s).
My single-point Clairemont anecdote is illustrative, but there is further evidence.
Look at Rich’s chart in this article:
http://voiceofsandiego.org/articles/2008/12/17/toscano/780monthlypayments090408.txtThe article was written in September, with data from a couple months prior to that (Case-Shiller). At that time mortgage rates were around 6% and prices have dropped another 5 to 10%.
If you factor in rates dropping to ~ 5% and the further price decline, today we are at or near an all time low on that chart, which goes back to the late 1970’s.
So esmith is right, things are cheap by historical standards. They may get significantly cheaper, but we are definitely seeing historically low housing costs when measured by affordability metrics.
December 17, 2008 at 8:29 AM #317067(former)FormerSanDieganParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.
– What’s the median house price in San Diego county?
– Knowing that you can get a 5% 30-year fixed mortgage, what would be your total monthly payment if you bought a median house today? Let’s say 20% down. Include property tax and downpayment opportunity loss. You can use this source to check historical mortgage rates and CD rates:
http://research.stlouisfed.org/fred2/series/WCD6M?cid=121
http://research.stlouisfed.org/fred2/series/MORTG?cid=114– When was the last time houses were this cheap?
– What if we use inflation-adjusted dollars?[/quote]
I don’t know if we are at the bottom in pricing, but I have to agree with esmith on the point that housing is near generational lows in San Diego in terms of affordability, since it is obvious that houses are more affrdable than they have been in my adult lifetime (I’m in my mid-40’s).
My single-point Clairemont anecdote is illustrative, but there is further evidence.
Look at Rich’s chart in this article:
http://voiceofsandiego.org/articles/2008/12/17/toscano/780monthlypayments090408.txtThe article was written in September, with data from a couple months prior to that (Case-Shiller). At that time mortgage rates were around 6% and prices have dropped another 5 to 10%.
If you factor in rates dropping to ~ 5% and the further price decline, today we are at or near an all time low on that chart, which goes back to the late 1970’s.
So esmith is right, things are cheap by historical standards. They may get significantly cheaper, but we are definitely seeing historically low housing costs when measured by affordability metrics.
December 17, 2008 at 8:29 AM #317108(former)FormerSanDieganParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.
– What’s the median house price in San Diego county?
– Knowing that you can get a 5% 30-year fixed mortgage, what would be your total monthly payment if you bought a median house today? Let’s say 20% down. Include property tax and downpayment opportunity loss. You can use this source to check historical mortgage rates and CD rates:
http://research.stlouisfed.org/fred2/series/WCD6M?cid=121
http://research.stlouisfed.org/fred2/series/MORTG?cid=114– When was the last time houses were this cheap?
– What if we use inflation-adjusted dollars?[/quote]
I don’t know if we are at the bottom in pricing, but I have to agree with esmith on the point that housing is near generational lows in San Diego in terms of affordability, since it is obvious that houses are more affrdable than they have been in my adult lifetime (I’m in my mid-40’s).
My single-point Clairemont anecdote is illustrative, but there is further evidence.
Look at Rich’s chart in this article:
http://voiceofsandiego.org/articles/2008/12/17/toscano/780monthlypayments090408.txtThe article was written in September, with data from a couple months prior to that (Case-Shiller). At that time mortgage rates were around 6% and prices have dropped another 5 to 10%.
If you factor in rates dropping to ~ 5% and the further price decline, today we are at or near an all time low on that chart, which goes back to the late 1970’s.
So esmith is right, things are cheap by historical standards. They may get significantly cheaper, but we are definitely seeing historically low housing costs when measured by affordability metrics.
December 17, 2008 at 8:29 AM #317130(former)FormerSanDieganParticipant[quote=esmith]How about we stop panicking and try to do some level-headed analysis.
– What’s the median house price in San Diego county?
– Knowing that you can get a 5% 30-year fixed mortgage, what would be your total monthly payment if you bought a median house today? Let’s say 20% down. Include property tax and downpayment opportunity loss. You can use this source to check historical mortgage rates and CD rates:
http://research.stlouisfed.org/fred2/series/WCD6M?cid=121
http://research.stlouisfed.org/fred2/series/MORTG?cid=114– When was the last time houses were this cheap?
– What if we use inflation-adjusted dollars?[/quote]
I don’t know if we are at the bottom in pricing, but I have to agree with esmith on the point that housing is near generational lows in San Diego in terms of affordability, since it is obvious that houses are more affrdable than they have been in my adult lifetime (I’m in my mid-40’s).
My single-point Clairemont anecdote is illustrative, but there is further evidence.
Look at Rich’s chart in this article:
http://voiceofsandiego.org/articles/2008/12/17/toscano/780monthlypayments090408.txtThe article was written in September, with data from a couple months prior to that (Case-Shiller). At that time mortgage rates were around 6% and prices have dropped another 5 to 10%.
If you factor in rates dropping to ~ 5% and the further price decline, today we are at or near an all time low on that chart, which goes back to the late 1970’s.
So esmith is right, things are cheap by historical standards. They may get significantly cheaper, but we are definitely seeing historically low housing costs when measured by affordability metrics.
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