US Median House Prices Fall

[Kidlicious]

Originally posted by rah
How is it for the rest of you?

1/3

[rah]

Mine was bassed on Gross pay.
Isn't the magic number for mortgage companies 25% of gross?

Even though it's been refinanced, our original morgage is from over 15 years ago so the amount was quite cheap compared to today's prices.

[KrazyHorse]

Originally posted by rah
I was reading in the paper the other day that the percentage of their gross income paid for housing is dramatically increasing. There's a much higher percentage in the 30s range (wish I had a link)

So I did a quick rough calculation and noticed that for our family it's around 10%

How is it for the rest of you?

In terms of after-tax income my wife and I spend ~30% on rent

[KrazyHorse]

In terms of gross income, it's more like 22.5%

[Wezil]

20%-25%

[Dauphin]

25% goes on tax? I would have thought it lower than that.

[DanS]

Including real estate taxes, for me the carrying cost is under 10% of my gross income. Over the last several years, the effective cost of my housing has been roughly -35% of my gross income, using the equation Adam Smith quoted. I was opportunistic by buying in a rough area that transitioned into yuppyville.

[Kuciwalker]

Originally posted by Provost Harrison
Typical physicist. Reality is far more complicated...decreasing overall house prices (especially if proportionally) may cause panic making more people sell increasing supply...or a large increase in interest rate may increase the number of repossessions and thus increase the supply of properties on the market...and then there are external factors...it is impossible to treat this kind of scenario like this.

And yet [our] Adam Smith did and economists regularly do.

[TCO]

Originally posted by KrazyHorse
My thought is that it's quite simply a bit of a bubble. It's not based on good sense or any classical micro theory. Just people wanting to believe that a 10% increase one year means 10% increases every year from then on, world without end, amen.

arbitrage.

[Colonâ„¢]

Originally posted by KrazyHorse
i.e. inflation. And if a drop in the fed funds rate causes additional inflation of 1% per annum this somehow explains an additional 5% per annum increase in housing?

I don't see why a monetary stimulus can't have a disproportionate impact on a certain sector of the economy. Upwards as well as downwards. We're talking about a time-period of only 5 to 10 years here and for all we know the next 5 to 10 years everything moves into the opposite direction.

The simple fact is that people were spending more of their incomes on housing, as a percent (or equivalently taking on longer amortization periods). A combination of inflation and lower interest rates does not predict that.

"Irrational exuberance"?

[TCO]

shade tree planter

[KrazyHorse]

Originally posted by TCO


arbitrage.

do elaborate

[:) Smiley]

colored maps listing average price per square foot of housing across the USA...

http://www.zillow.com/heatmaps/CityHeatMaps.htm

part of the reason the US housing market has gotten so distorted is that people aren't paying for houses, they're paying for land... it does not cost 10 times more to build a house here in the Bay Area than it does in the Midwest. Maybe twice as much, but definitely not 10 times.

[KrazyHorse]

Uh.....duh?

[Sikander]

Originally posted by Smiley
colored maps listing average price per square foot of housing across the USA...

http://www.zillow.com/heatmaps/CityHeatMaps.htm

part of the reason the US housing market has gotten so distorted is that people aren't paying for houses, they're paying for land... it does not cost 10 times more to build a house here in the Bay Area than it does in the Midwest. Maybe twice as much, but definitely not 10 times.

Well I bet the building codes and labor costs in S.F. are pretty stringent / high to start with. Then the cost of land is so high that the value of the building tends to be a small proportion of the total, which means it is a relatively small cost for someone spending that sort of money to build bigger or more elaborately. So they do so. The bottom line is that those buildings are more expensive on average than those built elsewhere, regardless of the land cost.