Median Incomes vs. Price of Housing
- Thread starter jsv416
- Start date
High beta stocks also decline first in a coming stock market decline.
Thank you. I prefer data to unsubstantiated gloom and doom predictions. As the saying goes: The primary reason we have economic forecasts is to make astrology respectable"
Seneca
RE is like politics, it is local and extrapolating what is going around you and assuming it is global is a mistake. In my home area, RE is in a mini boom. Where I have a condo, S. Fl. while in a bit of a slump still sees prices double what they were a few years ago-hardly a bubble bursting. Yes, they are down about 10% from a year ago while the flipping craze was at its peak and have settled down a bit. Nationally, prices are according to the NAHP up 0.3% year over year for July again hardly a bubble bursting. For single family homes, the bubble can be seen by the average price rising 1.5%.
Sources:
http://www.nahb.org/fileUpload_details.aspx?contentID=55764
http://www.realtor.org/Research.nsf/files/EHSreport.XLS/$FILE/EHSreport.XLS
The articles you read may say bubble, but show me the data that supports it on a global basis, not in some isolated pocket where craziness prevailed the past few years.
Seneca
I believe RE is over valued and that prices will contract. Perhaps even 30-40% in the deserts of the SW and 25% in Florida. Bubble? As in JNPR March of 2000? Nah. Where? I was looking at San Diego listings the other day. Expensive. No doubt. However given that it's a scenic jewel with the best climate in the wealthiest nation on earth, I don't find the prices stratospheric. In fact compared to L.A. it's actually reasonable. Am I surprised that several thousand people in the free world can afford homes 2mil and up from LaJolla on north? Hardly.
Two anecdotes. I lost quite a bit of money in 1993 shorting S&P's in the 400's. All time high prices. To this day we've never seen those levels again. So while homes may fill in the "bubble" part of this run-up, i.e. 2003 on, I doubt we'll EVER see 1996 prices again. Secondly being that I've always been in the trading business I've never known what "professionals" in my age bracket make. I got my first inkling about ten years ago when I was dating a 30yo woman who had a job at an ad agency. Her salary? A buck and a half per year. Her savings? 300k. In 1996 dollars to boot. So am I surprised that her and her equally well paid husband are now living in a million dollar home? Shit they're not breaking a sweat in paying it off. For all I know she's got a million salted away by now. There's more folks out there in those situations that we'd like to admit.
One last thing. In the City of Chicago the public schools suck. Much the same in most big cities. In the suburbs certain school districts are prime. So if it costs 15k a year in tuition for city dwellers then suburbanites get off the hook for just property taxes. 3 kids at New Trier. $45,000 worth of free education in exchange for 10k or so in property tax. A good deal. A GREAT deal. So if I throw that caveat in then the 800k for an old farm house in East Wilmette looks pretty cheap.
Two anecdotes. I lost quite a bit of money in 1993 shorting S&P's in the 400's. All time high prices. To this day we've never seen those levels again. So while homes may fill in the "bubble" part of this run-up, i.e. 2003 on, I doubt we'll EVER see 1996 prices again. Secondly being that I've always been in the trading business I've never known what "professionals" in my age bracket make. I got my first inkling about ten years ago when I was dating a 30yo woman who had a job at an ad agency. Her salary? A buck and a half per year. Her savings? 300k. In 1996 dollars to boot. So am I surprised that her and her equally well paid husband are now living in a million dollar home? Shit they're not breaking a sweat in paying it off. For all I know she's got a million salted away by now. There's more folks out there in those situations that we'd like to admit.
One last thing. In the City of Chicago the public schools suck. Much the same in most big cities. In the suburbs certain school districts are prime. So if it costs 15k a year in tuition for city dwellers then suburbanites get off the hook for just property taxes. 3 kids at New Trier. $45,000 worth of free education in exchange for 10k or so in property tax. A good deal. A GREAT deal. So if I throw that caveat in then the 800k for an old farm house in East Wilmette looks pretty cheap.
With so much talk about the housing bubble and so many shorts on the housing stocks; maybe it is time to start looking to go long the builders as many of them are down 40-50% or more from their highs.
Seneca
Seneca