Back to the topic of local rents and their relationship to incomes, I found some historical data on San Diego’s median household income at the Census Bureau website.
The median household income is better than per capita income, which I used in the prior article, because it is a median while per capita income is an average. A median is the middle value in an ordered set of data, and unlike an average it is not thrown off by extreme outlier values (per the "Bill Gates problem," in which Mr. Gates walks into a dive bar and the average net worth of all bar patrons skyrockets into the millions). So the median makes for a better indication of what the typical San Diegan household, and especially the typical San Diegan renter household, earns.
The Census site also had data on the median San Diego rent, which is also good. The downside is that the Census data only goes back to 2001 and is current through 2007. So we don’t get the same long-term view as in last week’s article, but it’s worth taking a look at this alternate set of numbers.
With all that said, here is a chart of the median rent as a percentage of median household income for San Diego:
I guess there was no bubble
I guess there was no bubble in the rental market 😉
Any idea what the numbers
Any idea what the numbers look like for nation-wide average? Is San Diego substantially higher or about the same? I know median rent is much higher in SD than average US value, but income is higher too.
ybitz wrote:Any idea what the
[quote=ybitz]Any idea what the numbers look like for nation-wide average? Is San Diego substantially higher or about the same? I know median rent is much higher in SD than average US value, but income is higher too.[/quote]
I don’t know where the nationwide data is offhand but you can probably find it by clicking around here (which is the regional data page): http://www.bea.gov/regional/REMDchart/default.cfm#chart_top
I’d be shocked if the ratio wasn’t substantially higher for SD than for nationwide… per the “sunshine tax” expression.
Let us know what you find out…
Rich
Don’t know about other areas
Don’t know about other areas but Downtown you’re getting more for the money.
I would imagine that in areas such as Eastlake, renters are also getting more for their money, thanks to all the new inventory.
You can buy a 2009 Toyota Camry for the same nominal, out the door price as a 2003 Camry. More the same amount of money (technically less in this case if you adjust for inflation).
It should be pointed out that
It should be pointed out that the chart shows median rent vs. median income of ALL households (including homeowner households). Median renter household income was consistently 65-70% of median household income during 2001-2007. If we divide apples to apples, we find that a median renter household would spend 31-33% of their gross income renting a median property – not 21-23% as the graph suggests.
But that only changes the scaling, because the basic conclusion is still correct – rent to income ratios have not changed much since 2001.
Eugene wrote:It should be
[quote=Eugene]It should be pointed out that the chart shows median rent vs. median income of ALL households (including homeowner households). Median renter household income was consistently 65-70% of median household income during 2001-2007. If we divide apples to apples, we find that a median renter household would spend 31-33% of their gross income renting a median property – not 21-23% as the graph suggests.
But that only changes the scaling, because the basic conclusion is still correct – rent to income ratios have not changed much since 2001.[/quote]
Yes, agreed on all counts… I should have made that distinction in the article. But the point wasn’t the level itself, just the change in the level. (As you note).
Rich
Depending on incomes in 2009
Depending on incomes in 2009 and 2010 we’ll see if there is a bubble.
The chart is nice and flat, but median income increased 31% over the period, inflation is only 19% over the period.
I wish my income had gone up
I wish my income had gone up 31% over the period; it has in fact stayed virtually flat (in nominal terms). I wonder how many others have experienced the same… I know we have not seen raises in my immediate work group since 2001, not even cost-of-living increases.
Whose income in San Diego increased that much, I wonder?
🙂
🙂
CricketOnTheHearth wrote:I
[quote=CricketOnTheHearth]I wish my income had gone up 31% over the period; it has in fact stayed virtually flat (in nominal terms). I wonder how many others have experienced the same… I know we have not seen raises in my immediate work group since 2001, not even cost-of-living increases.
Whose income in San Diego increased that much, I wonder?[/quote]
My income went up 79% between 2001 and 2008.
Numbers speak louder than
Numbers speak louder than words, I suppose.
Doesn’t fit with what I’m seeing in “real life,” but I definitely trust your numbers, and defer to your statistics, Rich. Maybe I’m just too bearish after all????
Thanks for putting this together.
It makes sense that rental
It makes sense that rental rates should be much more stable. It’s a far more free market due to lack of govt intervention and ease of movement for the renters. As long as there’s not a strong shift in the supply/demand ratio, rents/income should be a very stable ratio over time. Fairly sticky numbers.
Just wondering what all the
Just wondering what all the pigs think about the following site. It seems pretty straight forward, though I didnt see much on how they came up with their numbers. Doesnt mean they are right or wrong, means I didnt see it. Sometimes we all need a second opinion, and that is just what I am looking for. And yes I got this from a link on patrick.net.
Looks like housing compared to income tracks very closly to each other till 2001 then housing goes boom and we all know/lived the rest. Insightful in where we are in relation to incomes and the bubble in RE. For laughs, compare the 2001-now bubble with the 90’s bubble.
It only goes through to Jan 09, though I doubt much has changed drastically in the past 3 months.
http://www.zoyzoy.com/realestate/ofheo.php?msa=41740
So fire away, where are the problems in their numbers?
the most obvious one is that
the most obvious one is that their housing price index shows much higher appreciation since 2000 than Case-Shiller. Case-Shiller shows a 45-50% change since January 2000. Their index shows a 83% change (January 2000 index: 130, January 2009 index: 238).
what’s the point of rent vs
what’s the point of rent vs income? people rent by necessity or choice. people buy purely by choice.
show me the rent vs occupancy numbers. that, to me, is worth more than rent vs median income. i make plenty and yet the home purchase prices rose far too high as we all know. rents rose as well, but a rent vs income ratio does disservice to those of us who remained renters out of conservative values rather than buying with the mania.
if anything, the static ratio between rents and wages is a reflection of the rental robbery index rather than affordability. robbery was maintained at a constant level, yes.
note. i don’t mean to come off as *jackass*. i surely and most definately appreciate your (rich’s) work. i just sound like a jackass right now because i’ve been stewing on this topic for a few and i chose to comment on it while drunk. hmm…. not quite the unusual circumstance…