Posted on 01/30/2008 8:15:28 PM PST by Freedom_Is_Not_Free
It is obvious to most people that we are in the midst of a national housing bubble. Nevertheless, there are still plenty of naysayers who are telling anyone who will listen that there are local bubbles only.
Using the 2.8 formula, it is clear that local bubbles aren't the problem. Median home prices are inflated in every U.S. region. In the West, where the median household income is $52,249, median home prices are more than double what they should be. The situation is similar in the Northeast, where the median household income is $52,057.
Median home prices are not quite as high in the South and the Midwest, where median household incomes are $43,884 and $47,836 respectively. Even so, prices are still 30 percent higher than what they should be in the South and 16 percent higher than what they should be in the Midwest.
(Excerpt) Read more at homeguide123.com ...
a) median home prices over many years do not take into account the larger square footage of newer houses
b) the high costs, and inflationary effects of the municipality piling fee after fee on top of the developer.
I bought my current house new 7 years ago. It trippled here in the boom, but now we’re in a bust and it has dropped in value, but, it is still worth more than double what I paid for it.
By qualifying people for mortgages far above what their income could really handle = pay only the interest - etc etc ...then, of course, everyone climbed on the band wagon, driving the price of homes up almost double...realtors benefited, towns saw tax coffers swell - was beyond their real value...
Anyone who couldn't see this disaster coming from the get-go had blinders on.
My modest house in California that I bought in 1972 for $18,500 and sold in 1975 for $30,000 now goes for half a million. Insanity.
Beyond me how it can ever be brought to sanity - too many people in homes priced way beyond worth...
We bought our first house in the early 80’s...interest rate 10 percent, and it cost $35,000 (paid it off in 8 years.) Bought our second house in 1989 at a cost of $57,000 and the interest rate was 8%, and we kept refinancing down as the rate dropped until we paid it off.
Now if a young person would come along today and buy our home, the cost (after the bubble has burst) would be around $300,000, and the sad part is they would pay more for taxes and insurance alone, not counting the mortgage cost, than we ever paid for all three combined.
Difference in our income back in ‘89 and the average income now, I don’t think it’s doubled, yet the price of the house has soared. I feel bad for people trying to break into the real estate market, it’s awfully hard...at least in our part of the country. I just read a Forbes report about our area that says we’re probably going to see a V recovery, prices will bottom out and then spike up. IMHO, that’s not good news for our local economy...the average working family can’t and won’t be able to afford housing.
The bubble around here is in capacity, not price. Adjusted for inflation, there has been little change in prices in this area over the last 10 years or so, and probably over the last 30. (There was a bubble in the late 80s, but if you start either before or after that bubble, the numbers should work out about the same. The main bubbles were in the northeast, California, and portions of Florida.
That's a complicated one to analyze because in many cases the added size is not adding utility. I know people who routinely keep two rooms or a whole recreation room dark and unheated. These oversize McMansions were purchased for prestige value not use. The situation is somewhat similar to a sports car which goes 180 mph (or 205, I guess, in the case of the new Corvette). In fact, most passenger vehicles including pickup trucks will go over 115. Does this capability add economic value?
Just listed in the DC Exurbs:
1901 CAROLINE CT
WOODBRIDGE, VA 22191
List Price: $189,900
Prior Sale: $450,000 2/24/2006
Listing Date: 01/23/08
-57.8%
13912 LYNHURST DR
WOODBRIDGE, VA 22193
List Price: $179,900
Prior Sale: $417,000 8/5/2005
Listing Date: 01/28/08
-56.9%
8842 CHERRY OAK CT
MANASSAS, VA 20109
List Price: $129,900
Prior Sale: $295,000 8/31/2005
Listing Date: 01/25/08
-56.0%
1927 WILLOW LN
WOODBRIDGE, VA 22191
List Price: $159,000
Prior Sale: $350,000 1/24/2006
Listing Date: 01/23/08
-54.6%
7986 DEWARD CT
MANASSAS, VA 20110
List Price: $224,900
Prior Sale: $495,000 5/17/2006
Listing Date: 01/24/08
-54.6%
http://www.novabubblefallout.com
Heh. The “bubble” started in the early 1970s.
Yes, I have a work room in my house and an entertainment room that I wouldn't have had 50 years ago. I can entertain more guests, etc.
There is no way you could even build an average size house for $134692 like they’re saying the median should be - even if you used illegal labor.
I know because I just finished building my own home myself (without illegals). I spent approximately $165,000 in construction, 65,000 for the lot and about 10,000 for financing. I did a lot of the labor myself (framing, all cosmetics, etc). Altogether it cost me about $240,000 to build a 2157 sq foot home (not including the basement). There’s no way you would ever find workers or materials to build a home for $134000.
Home prices in Washington state are up 7% for 2007, not as big of an increase as in previous years, but an increase, never the less.
I am not saying that no one uses all their space. I use all my space. But a big chunk of newer homeowners don’t and have no plans to have children who will, etc.
The average family WANTS big houses. When I was a kid we had a very modest 3 bedroom house by todays standards, but a huge yard by the same standards. Today we want gigantic houses with tiny yards. In the 70s people would laugh at the idea of these houses built basically on top of one another, with no front yard and a back yard that you can barbecue in, but not much else.
That doesn’t mean though that Sq ft and low interest rates shouldn’t be taken into account. For example, this article talks about average from the 70s to current. It fails to mention that interest rates in the 70s and 80s were 2x-3x for a mortgage that they are now meaning it would be significantly more expensive than than now if the income:Price ratio stayed constant.
You want a tiny yard? You can keep it.
No argument with that.
That is really a side splitter. LOL
You cannot appraise a home without consideration of the finished square feet. ROFLOL
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