[Rich Toscano]

Thanks utcsox…

[Rich Toscano]

[quote=utcsox]
You can read the whole report here:

[Rich Toscano]

[quote=harvey]These “purchasing power” statistics are mildly interesting but mostly academic. The middle class really had more purchasing power in 1973?

Let’s ask the commonsense question:

What are examples of things that ordinary folk were buying in 1973 that they cannot afford today?[/quote]

[Rich Toscano]

[quote=bewildering]
I think Rich believes that the 2013 gains were not unreasonable in relation to rents, or income. Just a return to a normal market because few short sales/foreclosures. At least that is my reading of this blog.[/quote]

I don’t think I’d characterize it that way… 2013 saw prices go up quite dramatically in comparison to incomes/rents. I push back on the idea that it’s a “bubble” (fwiw with such a squishy term), or that it’s anything like what it was during the mid-2000s bubble. But, homes are substantially more expensive than has been historically typical, and most of that happened in 2013.

BTW, they went up in 2012, but that was mostly just going from “somewhat cheap” to “reasonable”… so I would say 2012 was the reversal of a” post-bubble overcorrection,” to use jazzman’s apt phrasing. But 2013… that was a different story.

In fact let me put some numbers on it, for giggles. This is using my little valuation index thinger, and comparing it with the historical median valuation:

Dec 2011: 8% undervalued
Dec 2012: 2% undervalued
Dec 2013: 13% overvalued

(Haven’t done the 2014 numbers yet… it’s on my list 😉

(but, I suspect that 2014 saw the valuation go up another few %… creeping a little higher but nothing like the 2013 frenzy)

[Rich Toscano]

Good question flu, and that may be part of the disconnect here. I am using BEA per capita personal income, which includes all sources of income, including investment income. (As it should… after all the point is to measure people’s ability to purchase).

If you want to get into the weeds, here’s the official definition:

Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts. Property income is rental income of persons, personal dividend income, and personal interest income. Net earnings is earnings by place of work (the sum of wages and salaries, supplements to wages and salaries, and proprietors’ income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence basis.

[Rich Toscano]

That’s an argument I’ve heard from some SD people in the tech industry, but you can’t assume that it applies to the entire economy. It just doesn’t. Per capita income is up over 20% since 2005 in SD (despite similar claims from tech industry people here that their wages have stagnated). I doubt it’s much different in OC. Citing one senior developer’s salary history doesn’t really prove anything about the economy as a whole, which is what matters.

Regarding rent, again, you are using just one property. Who knows what’s going on with that area, that building, etc. What matters for comparison to OC-wide home prices (which is the matter at hand, if you are claiming an OC housing bubble) is OC-wide rents. I don’t have that data for OC but I have it for SD and like incomes they have increased over 20% since the bubble peak.

[Rich Toscano]

[quote=kev374]
I hope Rich is only referring to SD real estate. Here in Orange County things are in a full fledged bubble. Even Trulia rates OC as 20% overvalued and they are usually conservative.
[/quote]

Yes I am referring to SD but everything I’ve seen indicates that the situation is very similar in OC. As it happens, I also show SD as being 20% overvalued. Expensive, for sure, but there is a difference between expensive and a “bubble.” By comparison, SD housing became 80% overvalued during the bubble.

[quote=kev374]
And finally for concrete proof..my friend bought his condo in Ladera at the very peak of the last bubble for $600k and sold it last month for $585k.
[/quote]

This proves absolutely nothing. At this point, the bubble peak was almost a decade ago! Rents and incomes, which are what support home prices, are much higher now than they were at the peak.

[quote=kev374]
I hope Rich can substantiate his claims. I bet he will say something to the effect of inflation and rents but that is nonsense. My rent is lower now than I was paying in 2005 and in a nicer area.[/quote]

Ah, so here is the heart of the disagreement. You feel that rents are lower now than at the peak. If this were true, you would have a point — but it’s not. There is no chance that OC-wide rents are lower now than they were in 2006 or wherever you want to mark the bubble peak.

As for substantiating my claims, I have done so via graphs like the one below that are based on sourced, publicly available data… how about substantiating yours?

[Rich Toscano]

CA renter, you are far too nice to me! 🙂

To the OP: if you haven’t seen it yet there’s some hopefully helpful info here:

Shambling Towards Affordability: Housing Valuations Surpass Pre-Bubble Peak

Yes, houses are pretty expensive, but nothing like during the bubble.

The “catch” is that interest rates are super low. So if you are planning on financing most of your purchase, and you are able to keep the house indefinitely (because the low financing costs are only beneficial over the long haul), then buying could make sense, depending on your situation/goals/etc. Effectively, the abnormally low financing cost is offsetting a high price in this scenario.

That said it’s also reasonable to not buy. Given where prices are, I don’t see enough price pressure to invoke the dreaded “priced out forever” scenario. So waiting could make sense. You could miss out on the super low rates, if/when they rise, but that could be offset by prices becoming more reasonable.

FWIW I don’t anticipate another home price “crash” as we saw last decade, because the valuation situation is just night and day. The current level of over-valuation could pretty easily be normalized by several years of flat or slightly down prices while incomes and rents continue to grow. Not predicting that scenario, just saying that it’s not like the bubble when a crash was basically the only way out.

Anyway, the bad news is there is no clear cut answer, but the good news is that it’s reasonable to go either way. I don’t feel like you should feel pressured to buy right now “or be priced out forever,” but at the same time, if you found a place you loved and wanted to buy (especially if you are financing), I think it would be perfectly reasonable to do so.

Hope this helps a bit.

[Rich Toscano]

[quote=FlyerInHi]
Considering the low rates, it was a missed opportunity for America to have an even stronger economy today. The government should have done more back to 2009-2011 to help the economy and negate the effects of the financial crisis.[/quote]

Brian, consider your history on this forum, and try to steer well clear of anything that even looks like political threadjacking. (For example: the above).

[Rich Toscano]

[quote=paramount]paramountclassic

To not read/write on any leftist/elitist/1%er real estate blogs.[/quote]

What about NAMBLA message boards in disguise?

[Rich Toscano]

I’m imagining something like this, except the arch behind them is a squat rack.

[Rich Toscano]

[quote=bearishgurl]The issue, zk, is that you are correlating being “tidy” with criminal behavior.”[/quote]

Uhm… what?

No, he’s not doing that at all. Did you read what he wrote, or his explanation of what he wrote, both of which make it clear that he’s not doing this AT ALL?

I also like how you basically accuse zk of being a rapist, etc, based solely on him mentioning that rapists exist. Classy move.

This is even more bizarre than your detailed rant about the Scott Peters winning the MAYOR’S race… BG, I think you need to put down the wine box.

[Rich Toscano]

Yeah, that’s interesting… I definitely have a tendency to get into “paralysis by analysis” ruts once in a while… I never related it to the T-ness but that totally makes sense.

[Rich Toscano]

Just to be clear specifically on the Myers-Briggs thing, the “T vs. F” spectrum isn’t about whether you have emotions, it’s about how you make decisions (whether it’s more driven by analysis or gut feel). It’s been a while since I read up on this stuff but that’s what I recall…

[Rich Toscano]

[quote=zk][

I’m still an INTP.[/quote]

Makes sense. I’m jealous of P’s… seems like a more relaxing way to live. I sometimes have E-envy too. I like my middle letters though.

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