Discredited NAR mouthpiece Lawrence Yun paid Seattle a visit on Friday to spout some more of his trademark wish-based forecasting. The Puget Sound Business Journal and the P-I both had brief write-ups of his presentation.
“We believe that the home prices have already fallen to what could be justifiable,” economist Lawrence Yun said, noting that mortgage payments for a typical household buying a typical house last year were back to 1998 levels, as a percentage of income.
“One may even argue that home prices are underpriced,” he said, because that calculation was based on higher interest rates than current rates.
This statement is so bizarre and nonsensical it’s hardly even worth refuting. As a number of readers pointed out over in the forums, Yun appears to be using national stats for income and home prices, which causes income to be skewed high by the cities (where home ownership levels are lower) and home prices to be skewed low by the rural regions.
Here in the Seattle area, the affordability index—which is calculated using local home prices and local incomes—is still well below its historical level. As I explained in Bottom-Calling: Affordability Index Forecast, home prices will have to fall roughly 40% from their peak to get us back in line with a level that “could be justifiable.” As of January, prices had fallen just over 20% from the peak. So we’re about halfway there.