How To Forecast the Real Estate Bottom
- Thread starter jamis359
- Start date
Avg detached home in san diego: $835K
Median household income: 55K
= 15 times median household income
10% down = $83K, good luck!
Required mortgage: 751K
@5.75% interest = $4382/month + taxes + utils
>= $52K/year just for the home
problem?
Lets do it backwards.
3.5X standard loan to income ratio
3.5 * 55K = 192K for a home
Current home price = 835K
Doesnt work. That gap will never close due to crazy california premium caused by weather, low property taxes, and stupid crazy california laws that allow you to walk away from a home and owe the bank nothing. Only the home can be taken as collateral. So its practically risk free buying, especially with almost nothing down.
Median household income: 55K
= 15 times median household income
10% down = $83K, good luck!
Required mortgage: 751K
@5.75% interest = $4382/month + taxes + utils
>= $52K/year just for the home
problem?
Lets do it backwards.
3.5X standard loan to income ratio
3.5 * 55K = 192K for a home
Current home price = 835K
Doesnt work. That gap will never close due to crazy california premium caused by weather, low property taxes, and stupid crazy california laws that allow you to walk away from a home and owe the bank nothing. Only the home can be taken as collateral. So its practically risk free buying, especially with almost nothing down.
Fallacious. I'm sure many others will see the obvious flaws in logic........
the easy money that pushed these prices is gone, the only way people will be able to get their price without dropping it will be to hold paper because the properties won't appraise for what they did a year ago, people will have to hold seconds as their only chance to hold on to their equity, i'm seeing it every week now, owner finance, lease options in neighborhoods that you would never see it, only will carry second
yeah yeah sure, whatever. according to your formula, san francisco homes should be selling for $350k but the average is $800k. so the prices need to drop by more than half.
it has been that way for 40 years. you'll be waiting a long long time for reality to match your fundamentals. your formula is simplisitic to the point of uselessness.
Fallacious. Im sure many others will notice you were to lazy to point them out
I do not know that much about what causes housing cycles because I am young. I am sure statistics can not show you the cause.
But what I found interesting, about this thread, was that I wrote an article about this topic a few months ago, which had the same set-up. The only major difference was that I used the U.S. Department of Labor employment projections.
http://www.bls.gov/emp/home.htm#data
This should shed some insight as to who will be buying these houses in the future, which are over the national average, I believe. Why look at the national average when over half included in that population rent? The hottest jobs should produce home buyers; that is indirectly why they are hot. Right?
The model has to be active; passive is useless. We have that already, median housing price.
I did not publish the article because I felt there were too many factors proving statistical evidence. San Fran, CA. and Youngstown, OH are completely different, so a general model should not fit. I believe this is true because if someone, either rich or poor, moves to one from the other what does it do to the data we see?
The median household income of SF and Youngstown make the data that produces the national average. It does not say that the national average will be paid in either of the two. I feel the national average is useless in the formula.
If there is a model capable of working, it has to incorporate the demographics of set area.
Students should not have this much time; where is the beer?
But what I found interesting, about this thread, was that I wrote an article about this topic a few months ago, which had the same set-up. The only major difference was that I used the U.S. Department of Labor employment projections.
http://www.bls.gov/emp/home.htm#data
This should shed some insight as to who will be buying these houses in the future, which are over the national average, I believe. Why look at the national average when over half included in that population rent? The hottest jobs should produce home buyers; that is indirectly why they are hot. Right?
The model has to be active; passive is useless. We have that already, median housing price.
I did not publish the article because I felt there were too many factors proving statistical evidence. San Fran, CA. and Youngstown, OH are completely different, so a general model should not fit. I believe this is true because if someone, either rich or poor, moves to one from the other what does it do to the data we see?
The median household income of SF and Youngstown make the data that produces the national average. It does not say that the national average will be paid in either of the two. I feel the national average is useless in the formula.
If there is a model capable of working, it has to incorporate the demographics of set area.
Students should not have this much time; where is the beer?
Actually you can make my formula work for San Francisco. You have to consider the high incomes and high available cash for down payments. There are tons of people with flush bank accounts from working at various tech and dot com firms over the years. With a limited inventory of detached homes, these higher end buyers squeeze out the typical middle class buyers who end up buying in Tracy or they rent apartments.
My formula works for every market if you adjust for local income, available cash and demographics. Real estate is no different from any other market, prices are always determined by the resources and leverage that bidders bring to the table, assuming no inventory shortages.
