Falling home prices said back in line with wages
http://seattlepi.nwsource.com/local/401 ... ors28.html
Aren't these the same folks who argue that real-estate isn't national, it's regional?
Seriously...Call me traditional, but I believe a home should be able to be supported on a single-income. I know it will never happen again, but both parents should not have to work just to pay for the 'typical house', which even at 1998 levels, they had to.
Yun, keep spinning those numbers....
Aren't these the same folks who argue that real-estate isn't national, it's regional?
"Nationwide home prices have fallen far enough, when combined with current low-mortgage interest rates, to get payments back in line with wages, the chief economist for the National Association of Realtors said in Bellevue Friday.
"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."
Seriously...Call me traditional, but I believe a home should be able to be supported on a single-income. I know it will never happen again, but both parents should not have to work just to pay for the 'typical house', which even at 1998 levels, they had to.
Yun, keep spinning those numbers....
Comments
Compensation is also being cut in many other ways (e.g. benefits, bonuses, etc).
In any event, house prices would have to come down a lot to reach historical income to purchase ratios. Tim did a piece on this recently, if I recall.
I bet "typical" = "median"
Take the median of all US wages - which is skewed up by the relatively high wages of people who live in populous, high cost states like NY and Calif - where home ownership is relatively low - and compare them to the median cost of homes, which is skewed down by places like the midwest where homes are cheap and home ownership is disproportionately high
voila, on a national basis homes are affordable.
great!
The guy is an economist and he works in realty...spin away!
Sniglet, I agree. I think we all have seen the memos from Microsoft temp agencies who are lowing wages 10% for existing, and even more for new assignments. How long can that last?
In the meantime we still have both MS and Boeing pending a few thousand more layoffs. Starbucks is silently laying-off as well, but at a staggered pace so as not to be forced to report it to the state.
Yun, I'm sure you're a smart guy, but seriously...Do you really believe what you are saying?
As of Q4 of 2008, the national median housing price was about $180k while the national median income was about $50k. Which gives you housing price multiple of 3.6, which combined with a historically low mortgage rate of 5.5%, you can certainly make a case that the housing price is in-line with income.
But of course, that does not tell you the whole story...
First, US household income most likely peaked in 2008. If you have not noticed, we are in the midst of historical recession (The Great Recession). With GDP shrinking 6.5% in Q4 of 2008, we are probably looking at -2 to -4% GDP negative growth for 2009 and +1 to -2% for 2010 (I am decidedly more pessimistic than the Obama administration).
Based on economic contraction, we are probably looking at household income going back to 2004 to 2006 level over the next couple of years (if not more). That would mean the median household income will be about $44k. Apply 4X mortgage multiplier on that and you are looking at about $20k to $25k more decline in national median housing price.
So, right now is certainly NOT the time to buy!
However, things are decidedly worse for our local housing market.
As you all already know, we are trending later than the rest of the nation. The median income for King County is about $75k, while the median house price is still $400k which gives you a mutiple of 5.3.
Between the general economy and layoffs from all the large employers in the King County (Boeing, Starbucks, Microsoft), you are probably looking at 2009-2010 median income for King County at about $65k to $70k. Even if you take the higher number, if you apply 4X multiplier on the income, you are looking at $280k for the median house price in King County.
That means, based on Yu's comment, King County should expect another 30%+ drop in housing price.
See, you can trust Yu every now and then...
Not sure if he's even nearing "half" the story
WRT GDP contraction. What happens when the $1Triillion/year (or however many hundreds of billions) of MEW stops (as it has).
With the velocity of money, how much did that $1Trillion add to GDP? How much will it take away if it's not there?
The .gov will spend a ton of money increasing their contribution (percentage and in total) towards GDP. Is this the same as private GDP creation? Is it better? Is it worse? Is it better for the GDP to raise due to government spending on "infrastructure projects" or when a homeowner HELOCs a new car?
Do I know the answer?
No. Just food for thought however.
I think it is the opposite.
I believe that because most parents work, home prices and other items adjusted price accordingly.
"We believe that the home prices have already fallen to what could be justifiable," HAHAHA
"The limit increase -- from $506,000 to $567,500 in the Seattle area -- means people can get larger loans without entering the private jumbo mortgage market." Except when the limits are allowed back to their previous level, your home becomes unsellable.
Also, more and more people, fearing a financial meltdown, are leaving the cities for the country. Those that can, that is. And most of them were either LONG TIME homeowners or renters. I'm trying to get a 60 year old Seattle friend to come out here. His home was worth $850k, and is now worth around $600k, but he only owes $200k. He could move here and live off the difference and never work another day in his life. And it rivals Seattle in its beauty and quality of life.
I'm living what I heard an economist say a year ago: I gave up a high standard of living for a high quality of life. The latter is superior. Significantly so.
I worked for a certain Seattle based national company until a few months ago when I made my move to Kentucky. About a year ago I saw an email adjusting the contractor amounts to be considered when estimating projects. All of the ammounts dropped. The differences varied but some positions saw a 50% drop.
Wages are actually going down. This is not surprising since the economy is in the eye of the storm. We are in a temporary period of real deflation. But it will be followed by inflation, almost certainly (in this case) followed by some degree of hyperinflation.
Remember, they can now print money "electronically". It can be simply "wished" into existence.