My premise that housing prices in Orange county and LA counties are too high is based largely on the idea that median incomes have stagnated while median home prices have increased. This is true for the country as a whole, but I never bothered checking whether it was true here. Perhaps incomes have increased, driving up housing prices in this area despite the downturn elsewhere.
Median household income in Orange County in 2000: $58,820
Median home price in orange county in 2000: $270,000
Ratio of home prices to income: 4.6
Median household income in Orange County 2005-2009: $73,738
Median home price in Orange county today: 441,700
Ratio of home prices to income: 5.99
The income data isn't quite as new as I would like, but it is unlikely that it went up much during the recession so I consider this to be reasonable. By this measure I would expect the home price in orange county to fall by another 1.4 times the median income, or about $100,000
For comparison lets look at Riverside county, where I suspect that home prices have hit bottom:
Median household income in Riverside county in 2000: $42,887
Median home price in Riverside county in 2000: $146,500
Ratio of home prices to income: 3.4
Median household income in Riverside county 2005-2009: $58,155
Median home price in Riverside county today: 203,300
Ratio of home prices to income: 3.5
The end of the bubble neatly settling at pre-bubble prices. The future of Orange county
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