Income to Mortgage Ratios in the new Banking System???

[DoJC]

http://i152.photobucket.com/albums/s166/servinginecuador/CAPrice-to-Income.jpg
– Doug

[DoJC]

Here are a few more excerpts, with links this time, to show ratios of up to 10:1 exist in various parts of CA:

#24 “My dad made money on his house, and it will work for me too.”
FALSE. Your dad bought his house when houses were cheap compared to salaries, maybe 3 or 4 times annual salaries. Go ask him. Things are different now. Here is a chart of median house price vs median income in Palo Alto:

Year Median House Price Median Income Multiple
1980 148900 24743 6.0
1990 457800 55333 8.3
2000 910000 90377 10.0

Most bankers use a multiple of 3 as a “safe” price to income ratio. We are well beyond the danger zone, into the twilight zone. Another rule of thumb is that a fair house price is between 100 and 200 times the monthly rent. If a house rents for $2000 per month, then a fair price is from $200,000 to $400,000.

http://www-formal.stanford.edu/selene/housing-bubble.html

http://i152.photobucket.com/albums/s166/servinginecuador/RiversidePricetoIncome.jpg

from: http://housing-kaboom.blogspot.com/2007_09_01_archive.html

There are more, but this is a good start to show that we have been a bit higher than 4:1 on price to income charts for CA.

– Doug

[DoJC]

Here are a few more excerpts, with links this time, to show ratios of up to 10:1 exist in various parts of CA:

#24 “My dad made money on his house, and it will work for me too.”
FALSE. Your dad bought his house when houses were cheap compared to salaries, maybe 3 or 4 times annual salaries. Go ask him. Things are different now. Here is a chart of median house price vs median income in Palo Alto:

Year Median House Price Median Income Multiple
1980 148900 24743 6.0
1990 457800 55333 8.3
2000 910000 90377 10.0

Most bankers use a multiple of 3 as a “safe” price to income ratio. We are well beyond the danger zone, into the twilight zone. Another rule of thumb is that a fair house price is between 100 and 200 times the monthly rent. If a house rents for $2000 per month, then a fair price is from $200,000 to $400,000.

http://www-formal.stanford.edu/selene/housing-bubble.html

http://i152.photobucket.com/albums/s166/servinginecuador/RiversidePricetoIncome.jpg

from: http://housing-kaboom.blogspot.com/2007_09_01_archive.html

There are more, but this is a good start to show that we have been a bit higher than 4:1 on price to income charts for CA.

– Doug

[DoJC]

Here are a few more excerpts, with links this time, to show ratios of up to 10:1 exist in various parts of CA:

#24 “My dad made money on his house, and it will work for me too.”
FALSE. Your dad bought his house when houses were cheap compared to salaries, maybe 3 or 4 times annual salaries. Go ask him. Things are different now. Here is a chart of median house price vs median income in Palo Alto:

Year Median House Price Median Income Multiple
1980 148900 24743 6.0
1990 457800 55333 8.3
2000 910000 90377 10.0

Most bankers use a multiple of 3 as a “safe” price to income ratio. We are well beyond the danger zone, into the twilight zone. Another rule of thumb is that a fair house price is between 100 and 200 times the monthly rent. If a house rents for $2000 per month, then a fair price is from $200,000 to $400,000.

http://www-formal.stanford.edu/selene/housing-bubble.html

http://i152.photobucket.com/albums/s166/servinginecuador/RiversidePricetoIncome.jpg

from: http://housing-kaboom.blogspot.com/2007_09_01_archive.html

There are more, but this is a good start to show that we have been a bit higher than 4:1 on price to income charts for CA.

– Doug

[DoJC]

Here are a few more excerpts, with links this time, to show ratios of up to 10:1 exist in various parts of CA:

#24 “My dad made money on his house, and it will work for me too.”
FALSE. Your dad bought his house when houses were cheap compared to salaries, maybe 3 or 4 times annual salaries. Go ask him. Things are different now. Here is a chart of median house price vs median income in Palo Alto:

Year Median House Price Median Income Multiple
1980 148900 24743 6.0
1990 457800 55333 8.3
2000 910000 90377 10.0

Most bankers use a multiple of 3 as a “safe” price to income ratio. We are well beyond the danger zone, into the twilight zone. Another rule of thumb is that a fair house price is between 100 and 200 times the monthly rent. If a house rents for $2000 per month, then a fair price is from $200,000 to $400,000.

http://www-formal.stanford.edu/selene/housing-bubble.html

http://i152.photobucket.com/albums/s166/servinginecuador/RiversidePricetoIncome.jpg

from: http://housing-kaboom.blogspot.com/2007_09_01_archive.html

There are more, but this is a good start to show that we have been a bit higher than 4:1 on price to income charts for CA.

– Doug

[DoJC]

Here are a few more excerpts, with links this time, to show ratios of up to 10:1 exist in various parts of CA:

#24 “My dad made money on his house, and it will work for me too.”
FALSE. Your dad bought his house when houses were cheap compared to salaries, maybe 3 or 4 times annual salaries. Go ask him. Things are different now. Here is a chart of median house price vs median income in Palo Alto:

Year Median House Price Median Income Multiple
1980 148900 24743 6.0
1990 457800 55333 8.3
2000 910000 90377 10.0

Most bankers use a multiple of 3 as a “safe” price to income ratio. We are well beyond the danger zone, into the twilight zone. Another rule of thumb is that a fair house price is between 100 and 200 times the monthly rent. If a house rents for $2000 per month, then a fair price is from $200,000 to $400,000.

http://www-formal.stanford.edu/selene/housing-bubble.html

http://i152.photobucket.com/albums/s166/servinginecuador/RiversidePricetoIncome.jpg

from: http://housing-kaboom.blogspot.com/2007_09_01_archive.html

There are more, but this is a good start to show that we have been a bit higher than 4:1 on price to income charts for CA.

– Doug

[HereWeGo]

HLS-

A little off topic, but what’s going on with mortgage rates? Fannie and Freddie debt would seem to be rocketing upwards, yield-wise. Has this all happened since the Congress increased the conforming limits?

Bloomberg now has a 30-year fixed benchmark of 6.08, whereas 1 month ago it was 5.47, 3 months ago 5.89, 6 months ago 6.17 (start of credit crunch), and 1 year ago 5.75.

[HereWeGo]

HLS-

A little off topic, but what’s going on with mortgage rates? Fannie and Freddie debt would seem to be rocketing upwards, yield-wise. Has this all happened since the Congress increased the conforming limits?

Bloomberg now has a 30-year fixed benchmark of 6.08, whereas 1 month ago it was 5.47, 3 months ago 5.89, 6 months ago 6.17 (start of credit crunch), and 1 year ago 5.75.

[HereWeGo]

HLS-

A little off topic, but what’s going on with mortgage rates? Fannie and Freddie debt would seem to be rocketing upwards, yield-wise. Has this all happened since the Congress increased the conforming limits?

Bloomberg now has a 30-year fixed benchmark of 6.08, whereas 1 month ago it was 5.47, 3 months ago 5.89, 6 months ago 6.17 (start of credit crunch), and 1 year ago 5.75.

[HereWeGo]

HLS-

A little off topic, but what’s going on with mortgage rates? Fannie and Freddie debt would seem to be rocketing upwards, yield-wise. Has this all happened since the Congress increased the conforming limits?

Bloomberg now has a 30-year fixed benchmark of 6.08, whereas 1 month ago it was 5.47, 3 months ago 5.89, 6 months ago 6.17 (start of credit crunch), and 1 year ago 5.75.

[HereWeGo]

HLS-

A little off topic, but what’s going on with mortgage rates? Fannie and Freddie debt would seem to be rocketing upwards, yield-wise. Has this all happened since the Congress increased the conforming limits?

Bloomberg now has a 30-year fixed benchmark of 6.08, whereas 1 month ago it was 5.47, 3 months ago 5.89, 6 months ago 6.17 (start of credit crunch), and 1 year ago 5.75.

[patientlywaiting]

Ex-SD wrote:

“My point is that many financial genius’s will tell you to leverage, leverage, leverage……………but leverage can easily land you in the poor house. Use common sense when getting a mortgage.”

*

That’s very wise advice. I agree. Your children are lucky. 🙂

Most people spend everything when they leverage. That’s why families who have lived in America for generations don’t have anything to their names. Let’s say a husband and wife can pay-off two houses in a lifetime of regular work. Their two children should have no need for mortgages.

[patientlywaiting]

Ex-SD wrote:

“My point is that many financial genius’s will tell you to leverage, leverage, leverage……………but leverage can easily land you in the poor house. Use common sense when getting a mortgage.”

*

That’s very wise advice. I agree. Your children are lucky. 🙂

Most people spend everything when they leverage. That’s why families who have lived in America for generations don’t have anything to their names. Let’s say a husband and wife can pay-off two houses in a lifetime of regular work. Their two children should have no need for mortgages.

[patientlywaiting]

Ex-SD wrote:

“My point is that many financial genius’s will tell you to leverage, leverage, leverage……………but leverage can easily land you in the poor house. Use common sense when getting a mortgage.”

*

That’s very wise advice. I agree. Your children are lucky. 🙂

Most people spend everything when they leverage. That’s why families who have lived in America for generations don’t have anything to their names. Let’s say a husband and wife can pay-off two houses in a lifetime of regular work. Their two children should have no need for mortgages.

[patientlywaiting]

Ex-SD wrote:

“My point is that many financial genius’s will tell you to leverage, leverage, leverage……………but leverage can easily land you in the poor house. Use common sense when getting a mortgage.”

*

That’s very wise advice. I agree. Your children are lucky. 🙂

Most people spend everything when they leverage. That’s why families who have lived in America for generations don’t have anything to their names. Let’s say a husband and wife can pay-off two houses in a lifetime of regular work. Their two children should have no need for mortgages.

[Author]

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