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(former)FormerSanDiegan.
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January 15, 2008 at 10:10 PM #136880January 16, 2008 at 12:35 AM #136654
Eugene
ParticipantIn equilibrium, rent ~ monthly carrying costs (mortgage, property tax, insurance, HOA fee, less typical mortgage interest deduction ) On the way down, house prices are likely to overshoot.
Assume 20% down payment for upscale/move-up houses and 5% down payment for low-end houses. During the boom new homebuyers used to put zero down, but today zero-down loans are less common. Very few potential new homebuyers have enough cash to put 20% down on a house in SoCal.
Richest people will occupy most attractive houses. In many areas there are fewer houses than households. In this situation poorest households have no choice but to rent.
Some parts of the country are more attractive than others. People living in attractive areas choose to spend larger fractions of their incomes on housing rather than to leave (the “sunshine tax”). In an attractive area, both house prices and rents will be higher in proportion to income than in an unattractive area. The list of attractive parts of the country includes Hawaii and most of coastal California (from Napa and Sonoma to Santa Barbara to San Diego). Inland areas are generally unattractive, with a few exceptions.
January 16, 2008 at 12:35 AM #136853ParticipantIn equilibrium, rent ~ monthly carrying costs (mortgage, property tax, insurance, HOA fee, less typical mortgage interest deduction ) On the way down, house prices are likely to overshoot.
Assume 20% down payment for upscale/move-up houses and 5% down payment for low-end houses. During the boom new homebuyers used to put zero down, but today zero-down loans are less common. Very few potential new homebuyers have enough cash to put 20% down on a house in SoCal.
Richest people will occupy most attractive houses. In many areas there are fewer houses than households. In this situation poorest households have no choice but to rent.
Some parts of the country are more attractive than others. People living in attractive areas choose to spend larger fractions of their incomes on housing rather than to leave (the “sunshine tax”). In an attractive area, both house prices and rents will be higher in proportion to income than in an unattractive area. The list of attractive parts of the country includes Hawaii and most of coastal California (from Napa and Sonoma to Santa Barbara to San Diego). Inland areas are generally unattractive, with a few exceptions.
January 16, 2008 at 12:35 AM #136887ParticipantIn equilibrium, rent ~ monthly carrying costs (mortgage, property tax, insurance, HOA fee, less typical mortgage interest deduction ) On the way down, house prices are likely to overshoot.
Assume 20% down payment for upscale/move-up houses and 5% down payment for low-end houses. During the boom new homebuyers used to put zero down, but today zero-down loans are less common. Very few potential new homebuyers have enough cash to put 20% down on a house in SoCal.
Richest people will occupy most attractive houses. In many areas there are fewer houses than households. In this situation poorest households have no choice but to rent.
Some parts of the country are more attractive than others. People living in attractive areas choose to spend larger fractions of their incomes on housing rather than to leave (the “sunshine tax”). In an attractive area, both house prices and rents will be higher in proportion to income than in an unattractive area. The list of attractive parts of the country includes Hawaii and most of coastal California (from Napa and Sonoma to Santa Barbara to San Diego). Inland areas are generally unattractive, with a few exceptions.
January 16, 2008 at 12:35 AM #136915ParticipantIn equilibrium, rent ~ monthly carrying costs (mortgage, property tax, insurance, HOA fee, less typical mortgage interest deduction ) On the way down, house prices are likely to overshoot.
Assume 20% down payment for upscale/move-up houses and 5% down payment for low-end houses. During the boom new homebuyers used to put zero down, but today zero-down loans are less common. Very few potential new homebuyers have enough cash to put 20% down on a house in SoCal.
Richest people will occupy most attractive houses. In many areas there are fewer houses than households. In this situation poorest households have no choice but to rent.
Some parts of the country are more attractive than others. People living in attractive areas choose to spend larger fractions of their incomes on housing rather than to leave (the “sunshine tax”). In an attractive area, both house prices and rents will be higher in proportion to income than in an unattractive area. The list of attractive parts of the country includes Hawaii and most of coastal California (from Napa and Sonoma to Santa Barbara to San Diego). Inland areas are generally unattractive, with a few exceptions.
January 16, 2008 at 12:35 AM #136954ParticipantIn equilibrium, rent ~ monthly carrying costs (mortgage, property tax, insurance, HOA fee, less typical mortgage interest deduction ) On the way down, house prices are likely to overshoot.
Assume 20% down payment for upscale/move-up houses and 5% down payment for low-end houses. During the boom new homebuyers used to put zero down, but today zero-down loans are less common. Very few potential new homebuyers have enough cash to put 20% down on a house in SoCal.
Richest people will occupy most attractive houses. In many areas there are fewer houses than households. In this situation poorest households have no choice but to rent.
Some parts of the country are more attractive than others. People living in attractive areas choose to spend larger fractions of their incomes on housing rather than to leave (the “sunshine tax”). In an attractive area, both house prices and rents will be higher in proportion to income than in an unattractive area. The list of attractive parts of the country includes Hawaii and most of coastal California (from Napa and Sonoma to Santa Barbara to San Diego). Inland areas are generally unattractive, with a few exceptions.
January 16, 2008 at 7:46 AM #136691kewp
ParticipantFundamentals are what set the price floor of an asset in the absence of speculation.
For real-estate in most areas that would be income. As we are seeing in parts of Detroit, local unemployment can drive the retail value of many properties to effectively zero.
In San Diego, as we are a big tourism destination, there is also a market for second vacation homes here. This will prop up the median housing cost somewhat above what one would expect vs. the median income.
*However*, this will only drive up demand for homes that rich folk are going to want to vacation in. Properties in the ghetto and IE need not apply.
January 16, 2008 at 7:46 AM #136888ParticipantFundamentals are what set the price floor of an asset in the absence of speculation.
For real-estate in most areas that would be income. As we are seeing in parts of Detroit, local unemployment can drive the retail value of many properties to effectively zero.
In San Diego, as we are a big tourism destination, there is also a market for second vacation homes here. This will prop up the median housing cost somewhat above what one would expect vs. the median income.
*However*, this will only drive up demand for homes that rich folk are going to want to vacation in. Properties in the ghetto and IE need not apply.
January 16, 2008 at 7:46 AM #136922ParticipantFundamentals are what set the price floor of an asset in the absence of speculation.
For real-estate in most areas that would be income. As we are seeing in parts of Detroit, local unemployment can drive the retail value of many properties to effectively zero.
In San Diego, as we are a big tourism destination, there is also a market for second vacation homes here. This will prop up the median housing cost somewhat above what one would expect vs. the median income.
*However*, this will only drive up demand for homes that rich folk are going to want to vacation in. Properties in the ghetto and IE need not apply.
January 16, 2008 at 7:46 AM #136948ParticipantFundamentals are what set the price floor of an asset in the absence of speculation.
For real-estate in most areas that would be income. As we are seeing in parts of Detroit, local unemployment can drive the retail value of many properties to effectively zero.
In San Diego, as we are a big tourism destination, there is also a market for second vacation homes here. This will prop up the median housing cost somewhat above what one would expect vs. the median income.
*However*, this will only drive up demand for homes that rich folk are going to want to vacation in. Properties in the ghetto and IE need not apply.
January 16, 2008 at 7:46 AM #136988ParticipantFundamentals are what set the price floor of an asset in the absence of speculation.
For real-estate in most areas that would be income. As we are seeing in parts of Detroit, local unemployment can drive the retail value of many properties to effectively zero.
In San Diego, as we are a big tourism destination, there is also a market for second vacation homes here. This will prop up the median housing cost somewhat above what one would expect vs. the median income.
*However*, this will only drive up demand for homes that rich folk are going to want to vacation in. Properties in the ghetto and IE need not apply.
January 16, 2008 at 8:01 AM #136696(former)FormerSanDiegan
Participantback in line with the fundamentals”
barnaby33,
That was Rich Toscano’s statement in his commentary today.
If I was shopping for a new house, I would certainly want to have a clue as to what are these fundamentals that everyone is talking about.
The simple answer is that home prices and payments have far outpaced income growth and rents from about 1999 to 2005 (for San Diego).
Have you read the primer on this web site ?
http://piggington.com/In the top center there is a box that says “A Bubble Primer”.
Check out
http://piggington.com/historical_home_prices_payments_rents_ratesAs for precise quantitative measures of how far back the ratio of prices to incomes or prices to rents need to return to, that is the 400,000 dollar question.
January 16, 2008 at 8:01 AM #136893Participantback in line with the fundamentals”
barnaby33,
That was Rich Toscano’s statement in his commentary today.
If I was shopping for a new house, I would certainly want to have a clue as to what are these fundamentals that everyone is talking about.
The simple answer is that home prices and payments have far outpaced income growth and rents from about 1999 to 2005 (for San Diego).
Have you read the primer on this web site ?
http://piggington.com/In the top center there is a box that says “A Bubble Primer”.
Check out
http://piggington.com/historical_home_prices_payments_rents_ratesAs for precise quantitative measures of how far back the ratio of prices to incomes or prices to rents need to return to, that is the 400,000 dollar question.
January 16, 2008 at 8:01 AM #136928Participantback in line with the fundamentals”
barnaby33,
That was Rich Toscano’s statement in his commentary today.
If I was shopping for a new house, I would certainly want to have a clue as to what are these fundamentals that everyone is talking about.
The simple answer is that home prices and payments have far outpaced income growth and rents from about 1999 to 2005 (for San Diego).
Have you read the primer on this web site ?
http://piggington.com/In the top center there is a box that says “A Bubble Primer”.
Check out
http://piggington.com/historical_home_prices_payments_rents_ratesAs for precise quantitative measures of how far back the ratio of prices to incomes or prices to rents need to return to, that is the 400,000 dollar question.
January 16, 2008 at 8:01 AM #136955Participantback in line with the fundamentals”
barnaby33,
That was Rich Toscano’s statement in his commentary today.
If I was shopping for a new house, I would certainly want to have a clue as to what are these fundamentals that everyone is talking about.
The simple answer is that home prices and payments have far outpaced income growth and rents from about 1999 to 2005 (for San Diego).
Have you read the primer on this web site ?
http://piggington.com/In the top center there is a box that says “A Bubble Primer”.
Check out
http://piggington.com/historical_home_prices_payments_rents_ratesAs for precise quantitative measures of how far back the ratio of prices to incomes or prices to rents need to return to, that is the 400,000 dollar question.
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