Help me see the bottom

[housepoor]

So here is my train of thought, which ends up with an unanswered question that I thought I could lean on you folks for…

It seems to me that the bottom will come when incomes and home prices match up a little more realistically. When people can again afford homes is when we will start to see them be purchased. But I guess the problem with a statement like that is that one could argue right now, or maybe after 9 more months of massive foreclosures, that we do in fact have a situation where only people who can truly afford homes will own them and the rest of us will rent. So in 9 months, for example then, are we done? are we at bottom? I guess my question is: what is the norm for home ownership percentages in the county? Because if prices stop adjusting in 9 months, and only 50% of people can own at that point, sure we are at equilibrium, but are we at the “right” or “normal” equilibrium?

Hopefully this question makes sense, and hopefully even more so, someone might have some data as to what SD ownership rates have looked like in the past.

It seems to me that this rate alongside the home price to annual income ratio would really help predict the bottom. That is if you assume that income has to be a major influence on when this cat is going to stop falling. or this knife. or the analogy de jour.

Thanks

[Doofrat]

I wouldn’t say we are at the bottom when home prices and and incomes match up, we will only be at the fundamentals, house prices could and probably will (who am I kidding, just look at the graph, of course they will!) drop below the fundamentals before they hit bottom. Look at Rich’s graphs of historical price/income ratios:

http://piggington.com/images/primer/sdpricetoincome.gif

They go well below the historical averages on their way down from even minor ‘bubbles’, I can’t imagine a different outcome this time, except most likely more severe.

It seems like home ownership rates would be a laggy indicator and tough to figure out at this point. How do you know if it’s hit it’s historical average that another wave of foreclosures won’t hit and push it well below the average.

[Doofrat]

I wouldn’t say we are at the bottom when home prices and and incomes match up, we will only be at the fundamentals, house prices could and probably will (who am I kidding, just look at the graph, of course they will!) drop below the fundamentals before they hit bottom. Look at Rich’s graphs of historical price/income ratios:

http://piggington.com/images/primer/sdpricetoincome.gif

They go well below the historical averages on their way down from even minor ‘bubbles’, I can’t imagine a different outcome this time, except most likely more severe.

It seems like home ownership rates would be a laggy indicator and tough to figure out at this point. How do you know if it’s hit it’s historical average that another wave of foreclosures won’t hit and push it well below the average.

[Doofrat]

I wouldn’t say we are at the bottom when home prices and and incomes match up, we will only be at the fundamentals, house prices could and probably will (who am I kidding, just look at the graph, of course they will!) drop below the fundamentals before they hit bottom. Look at Rich’s graphs of historical price/income ratios:

http://piggington.com/images/primer/sdpricetoincome.gif

They go well below the historical averages on their way down from even minor ‘bubbles’, I can’t imagine a different outcome this time, except most likely more severe.

It seems like home ownership rates would be a laggy indicator and tough to figure out at this point. How do you know if it’s hit it’s historical average that another wave of foreclosures won’t hit and push it well below the average.

[Doofrat]

I wouldn’t say we are at the bottom when home prices and and incomes match up, we will only be at the fundamentals, house prices could and probably will (who am I kidding, just look at the graph, of course they will!) drop below the fundamentals before they hit bottom. Look at Rich’s graphs of historical price/income ratios:

http://piggington.com/images/primer/sdpricetoincome.gif

They go well below the historical averages on their way down from even minor ‘bubbles’, I can’t imagine a different outcome this time, except most likely more severe.

It seems like home ownership rates would be a laggy indicator and tough to figure out at this point. How do you know if it’s hit it’s historical average that another wave of foreclosures won’t hit and push it well below the average.

[Doofrat]

I wouldn’t say we are at the bottom when home prices and and incomes match up, we will only be at the fundamentals, house prices could and probably will (who am I kidding, just look at the graph, of course they will!) drop below the fundamentals before they hit bottom. Look at Rich’s graphs of historical price/income ratios:

http://piggington.com/images/primer/sdpricetoincome.gif

They go well below the historical averages on their way down from even minor ‘bubbles’, I can’t imagine a different outcome this time, except most likely more severe.

It seems like home ownership rates would be a laggy indicator and tough to figure out at this point. How do you know if it’s hit it’s historical average that another wave of foreclosures won’t hit and push it well below the average.

[urbanrealtor]

Alright, while I see the benefit in income and employment rates as indicative of the relative health of the local economy, I am not sure about using these rates to directly measure the health of real estate. Eg: the economy vs. real estate in most of the 90’s.

Also, viewing SD county as a single monolithic market is a little like applying normal nationwide economic models to a national housing market. Don’t get me wrong. They do have some amount of marginal utility. However, its limited. Certainly it is better than defining it as, say, the “southern california” market. The housing market between say Temecula and La Jolla have little in common in any economic or real property category.

If you are looking to see the bottom I would recommend looking for some benchmarks based on market fundamentals.
One benchmark is price stability. Have a look at comparable closings over time.

Feb 401
Mar 517
April 428
May 415
June 477
July 390

These numbers are are the price per square foot of 2br units in 92101 that are between 700 and 1100 square feet in size.The numbers indicate a wide range and relative instability in that micro market.

Another benchmark to consider is the relative cost compared to rent. In distressed sections of central SD (eg: City Heights), one can buy with 5% cash and the rent will be more than mortgage. When buying is cheaper than renting, generally its a pretty good bet.

Yet another benchmark is the cost of construction. Some areas to the Northeast of town are curredntly selling for less than 175 per square foot (think Menifee). At that price it is often close to the price of construction.

While finding the absolute lowest price in a downturn is difficult and ill-advised (market timing in the boom did not work well either) these are some tricks I use. If you see all three benchmarks line up, probably prices are done falling for a while.

Again my opinion, but I have seen a lot of people new to investing have relative success with this.

[urbanrealtor]

Alright, while I see the benefit in income and employment rates as indicative of the relative health of the local economy, I am not sure about using these rates to directly measure the health of real estate. Eg: the economy vs. real estate in most of the 90’s.

Also, viewing SD county as a single monolithic market is a little like applying normal nationwide economic models to a national housing market. Don’t get me wrong. They do have some amount of marginal utility. However, its limited. Certainly it is better than defining it as, say, the “southern california” market. The housing market between say Temecula and La Jolla have little in common in any economic or real property category.

If you are looking to see the bottom I would recommend looking for some benchmarks based on market fundamentals.
One benchmark is price stability. Have a look at comparable closings over time.

Feb 401
Mar 517
April 428
May 415
June 477
July 390

These numbers are are the price per square foot of 2br units in 92101 that are between 700 and 1100 square feet in size.The numbers indicate a wide range and relative instability in that micro market.

Another benchmark to consider is the relative cost compared to rent. In distressed sections of central SD (eg: City Heights), one can buy with 5% cash and the rent will be more than mortgage. When buying is cheaper than renting, generally its a pretty good bet.

Yet another benchmark is the cost of construction. Some areas to the Northeast of town are curredntly selling for less than 175 per square foot (think Menifee). At that price it is often close to the price of construction.

While finding the absolute lowest price in a downturn is difficult and ill-advised (market timing in the boom did not work well either) these are some tricks I use. If you see all three benchmarks line up, probably prices are done falling for a while.

Again my opinion, but I have seen a lot of people new to investing have relative success with this.

[urbanrealtor]

Alright, while I see the benefit in income and employment rates as indicative of the relative health of the local economy, I am not sure about using these rates to directly measure the health of real estate. Eg: the economy vs. real estate in most of the 90’s.

Also, viewing SD county as a single monolithic market is a little like applying normal nationwide economic models to a national housing market. Don’t get me wrong. They do have some amount of marginal utility. However, its limited. Certainly it is better than defining it as, say, the “southern california” market. The housing market between say Temecula and La Jolla have little in common in any economic or real property category.

If you are looking to see the bottom I would recommend looking for some benchmarks based on market fundamentals.
One benchmark is price stability. Have a look at comparable closings over time.

Feb 401
Mar 517
April 428
May 415
June 477
July 390

These numbers are are the price per square foot of 2br units in 92101 that are between 700 and 1100 square feet in size.The numbers indicate a wide range and relative instability in that micro market.

Another benchmark to consider is the relative cost compared to rent. In distressed sections of central SD (eg: City Heights), one can buy with 5% cash and the rent will be more than mortgage. When buying is cheaper than renting, generally its a pretty good bet.

Yet another benchmark is the cost of construction. Some areas to the Northeast of town are curredntly selling for less than 175 per square foot (think Menifee). At that price it is often close to the price of construction.

While finding the absolute lowest price in a downturn is difficult and ill-advised (market timing in the boom did not work well either) these are some tricks I use. If you see all three benchmarks line up, probably prices are done falling for a while.

Again my opinion, but I have seen a lot of people new to investing have relative success with this.

[urbanrealtor]

Alright, while I see the benefit in income and employment rates as indicative of the relative health of the local economy, I am not sure about using these rates to directly measure the health of real estate. Eg: the economy vs. real estate in most of the 90’s.

Also, viewing SD county as a single monolithic market is a little like applying normal nationwide economic models to a national housing market. Don’t get me wrong. They do have some amount of marginal utility. However, its limited. Certainly it is better than defining it as, say, the “southern california” market. The housing market between say Temecula and La Jolla have little in common in any economic or real property category.

If you are looking to see the bottom I would recommend looking for some benchmarks based on market fundamentals.
One benchmark is price stability. Have a look at comparable closings over time.

Feb 401
Mar 517
April 428
May 415
June 477
July 390

These numbers are are the price per square foot of 2br units in 92101 that are between 700 and 1100 square feet in size.The numbers indicate a wide range and relative instability in that micro market.

Another benchmark to consider is the relative cost compared to rent. In distressed sections of central SD (eg: City Heights), one can buy with 5% cash and the rent will be more than mortgage. When buying is cheaper than renting, generally its a pretty good bet.

Yet another benchmark is the cost of construction. Some areas to the Northeast of town are curredntly selling for less than 175 per square foot (think Menifee). At that price it is often close to the price of construction.

While finding the absolute lowest price in a downturn is difficult and ill-advised (market timing in the boom did not work well either) these are some tricks I use. If you see all three benchmarks line up, probably prices are done falling for a while.

Again my opinion, but I have seen a lot of people new to investing have relative success with this.

[urbanrealtor]

Alright, while I see the benefit in income and employment rates as indicative of the relative health of the local economy, I am not sure about using these rates to directly measure the health of real estate. Eg: the economy vs. real estate in most of the 90’s.

Also, viewing SD county as a single monolithic market is a little like applying normal nationwide economic models to a national housing market. Don’t get me wrong. They do have some amount of marginal utility. However, its limited. Certainly it is better than defining it as, say, the “southern california” market. The housing market between say Temecula and La Jolla have little in common in any economic or real property category.

If you are looking to see the bottom I would recommend looking for some benchmarks based on market fundamentals.
One benchmark is price stability. Have a look at comparable closings over time.

Feb 401
Mar 517
April 428
May 415
June 477
July 390

These numbers are are the price per square foot of 2br units in 92101 that are between 700 and 1100 square feet in size.The numbers indicate a wide range and relative instability in that micro market.

Another benchmark to consider is the relative cost compared to rent. In distressed sections of central SD (eg: City Heights), one can buy with 5% cash and the rent will be more than mortgage. When buying is cheaper than renting, generally its a pretty good bet.

Yet another benchmark is the cost of construction. Some areas to the Northeast of town are curredntly selling for less than 175 per square foot (think Menifee). At that price it is often close to the price of construction.

While finding the absolute lowest price in a downturn is difficult and ill-advised (market timing in the boom did not work well either) these are some tricks I use. If you see all three benchmarks line up, probably prices are done falling for a while.

Again my opinion, but I have seen a lot of people new to investing have relative success with this.

[sdduuuude]

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