It’s time for a little update on the long-term aggregate housing valuation charts. (The emphasis is on the word "aggregate" — let’s just get it right out of the way these charts are based on a single home price measurement that encompasses the high end, the low end, and everything in between).
To sum it up, we’ve gone pretty much nowhere since the prior checkup on these numbers as of December 2008.
The home price-to-income ratio had dropped further in the early part of the year, but rising home prices and falling incomes have combined to nudge the ratio back up in recent months.
I should note here that because there are no local income figures available yet, 2009 San Diego incomes are estimated based on the change to nationwide incomes. Also, the past couple of months’ home prices are estimated based on changes to the size-adjusted median single family home price.
The price-to-rent ratio has also notched some gains during the spring/summer rally, but the increase here was not as large as that of the price-to-rent ratio because the BLS actually measured an increase in San Diego rents for the first half of 2009. I am skeptical of this result, but as you can see in the chart below it doesn’t make that much difference. Home price changes are the big movers on these charts, and as with the price-to-income ratio, the price-to-rent ratio ended up being very near what it was the last time we checked it in late 2008.
The next two charts update the monthly payment-to-income and payment-to-rent ratios. Both are up off their early-2009 lows, of course, but not by much — and those were all-time lows:
Of course, the apparent "cheapness" of the payment-based indicators has more to do with ridiculously low mortgage rates than with purchase prices being cheap. Believing that the last two charts indicate that San Diego homes are sustainably undervalued requires believing that mortgage rates will stay at or near current levels. That is not a belief I share, to put it mildly.
The more important price-based valuation metrics show that, in aggregate, San Diego homes are neither overvalued nor undervalued based on their historical relationships with rents and incomes. This was the case as of the prior update on these numbers, so given that the numbers have barely budged it should be no surprise that the conclusion is the same this time around.