What ARE the fundamentals?

[(former)FormerSanDiegan]

back 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

Risks of a Serious Home Price Decline

Evidence of a Southern California Housing Bubble

http://piggington.com/historical_home_prices_payments_rents_rates

The San Diego Housing Bubble

As 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.

[nostradamus]

Good graphs. They show that there was a clear period at the end of the last downturn when it was cheaper to own than to rent.

[nostradamus]

Good graphs. They show that there was a clear period at the end of the last downturn when it was cheaper to own than to rent.

[nostradamus]

Good graphs. They show that there was a clear period at the end of the last downturn when it was cheaper to own than to rent.

[nostradamus]

Good graphs. They show that there was a clear period at the end of the last downturn when it was cheaper to own than to rent.

[nostradamus]

Good graphs. They show that there was a clear period at the end of the last downturn when it was cheaper to own than to rent.

[I would rather be lucky then smart]

thank you all.

[I would rather be lucky then smart]

thank you all.

[I would rather be lucky then smart]

thank you all.

[I would rather be lucky then smart]

thank you all.

[I would rather be lucky then smart]

thank you all.

[sdduuuude]

I think it’s a good question, and the basic answer, as others point out, are rent/price ratios, price/income ratios, and payment/income ratios. Look at all of them.

When looking at payment/income – don’t compare the payment on a 20% down fixed loan in 2001 to the payment on a zero-down adjustable loan in 2005. Compare apples-to-apples in different years to see how the fundamentals ceased to support the price.

We always have and always will pay a premium for weather here. It is an underlying fundamental to support higher prices in So Cal than in other parts of the country.

However, as Rich pointed out many, many times, the weather didn’t suddenly improve here between 2000 and 2004. Thus, the premium had no fundamental reason to increase as it did.

Weather was simply fuel to the speculative ferver.

[sdduuuude]

I think it’s a good question, and the basic answer, as others point out, are rent/price ratios, price/income ratios, and payment/income ratios. Look at all of them.

When looking at payment/income – don’t compare the payment on a 20% down fixed loan in 2001 to the payment on a zero-down adjustable loan in 2005. Compare apples-to-apples in different years to see how the fundamentals ceased to support the price.

We always have and always will pay a premium for weather here. It is an underlying fundamental to support higher prices in So Cal than in other parts of the country.

However, as Rich pointed out many, many times, the weather didn’t suddenly improve here between 2000 and 2004. Thus, the premium had no fundamental reason to increase as it did.

Weather was simply fuel to the speculative ferver.

[sdduuuude]

I think it’s a good question, and the basic answer, as others point out, are rent/price ratios, price/income ratios, and payment/income ratios. Look at all of them.

When looking at payment/income – don’t compare the payment on a 20% down fixed loan in 2001 to the payment on a zero-down adjustable loan in 2005. Compare apples-to-apples in different years to see how the fundamentals ceased to support the price.

We always have and always will pay a premium for weather here. It is an underlying fundamental to support higher prices in So Cal than in other parts of the country.

However, as Rich pointed out many, many times, the weather didn’t suddenly improve here between 2000 and 2004. Thus, the premium had no fundamental reason to increase as it did.

Weather was simply fuel to the speculative ferver.

[sdduuuude]

I think it’s a good question, and the basic answer, as others point out, are rent/price ratios, price/income ratios, and payment/income ratios. Look at all of them.

When looking at payment/income – don’t compare the payment on a 20% down fixed loan in 2001 to the payment on a zero-down adjustable loan in 2005. Compare apples-to-apples in different years to see how the fundamentals ceased to support the price.

We always have and always will pay a premium for weather here. It is an underlying fundamental to support higher prices in So Cal than in other parts of the country.

However, as Rich pointed out many, many times, the weather didn’t suddenly improve here between 2000 and 2004. Thus, the premium had no fundamental reason to increase as it did.

Weather was simply fuel to the speculative ferver.

[Author]

Posts