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Old Today, 05:45 AM
 
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Quote:
Originally Posted by mathjak107 View Post
3 to 4x was an average but it is heavily dependent on interest rates ...when rates are higher or lower the ratio changes..

Only 16 out of the 100 most populated areas are under 2.6 today....

All that counts is what the area you want to buy in is seeing and historically at .

Like everything pertaining to lifestyle , median or average incomes mean diddly ... you need to go by your own local area and what it takes to live the life you want ....

https://listwithclever.com/real-esta...torical-study/

The OP is correct. 3x is where we should be at as a nation. We have had quite a run of historically low interest rates. Something else that can't last forever. When interest rates can no longer be held down and inflation kicks in we will see housing prices back to where they should be.
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Old Today, 05:48 AM
 
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Quote:
Originally Posted by Oklazona Bound View Post
The OP is correct. 3x is where we should be at as a nation. We have had quite a run of historically low interest rates. Something else that can't last forever. When interest rates can no longer be held down and inflation kicks in we will see housing prices back to where they should be.
Good luck thinking that .it won’t happen, anymore then as a country every one should earn the national median income .

This country is made of of 1500 different mini economies ...most differ at the same point in time ....an average number applies likely to few or none of them in pretty much anything

High cost of living areas are not high cost in a vacuum...they are high cost because they are more desirable than other areas .....the. Housing prices are higher ,taxes are higher and that is because they offer wages that are higher or the people are wealthier ..


So nooooooo ,there is no way as a country we can ever be the same across the board
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Old Today, 05:51 AM
 
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Quote:
Originally Posted by Avondalist View Post
After house prices crashed, they reverted back to the historical trendline, which is 3x local incomes.

JP's Real Estate Charts: Inflation-adjusted housing prices

People think 2000-2006 or 2010-now is how housing markets are "supposed" to work and the 2009 prices were a bargain. In reality the 2009 prices were historically normal and real estate has mostly been overpriced since 2000.

It's really sad that we've lost sight of this. Your primary residence should be seen as a cost to be minimized, so the old way was better in that respect.
You need to take into account lower interest rates.

Taking into account the lower interest rates I would say the new normal is around 4 - 5.
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Old Today, 05:52 AM
 
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Quote:
Originally Posted by Camlon View Post
You need to take into account higher interest rates.

Taking into the lower interest rates I would say the new normal is around 4 - 5.
I mentioned that above ...rates play a big factor in the ratio
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Old Today, 05:59 AM
 
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Quote:
Originally Posted by mathjak107 View Post
Good luck thinking that .it wonít happen, anymore then as a country every one should earn the national median income .

This country is made of off 1500 different mini economies ...most differ at the same point in time ....an average number applies likely to few or none of them in pretty much anything
I did not say NYC would go back to that. Nor places like California. But there are factors in play today like there were factors in play back before 2008 that pushed prices much higher than they should have been. Last time it was the subprime lending and other issues surrounding it now its keeping interest rates too low for too long. The country is in better shape with slow but steady appreciation not manic housing bubbles.
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Old Today, 06:02 AM
 
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Quote:
Originally Posted by Camlon View Post
You need to take into account lower interest rates.

Taking into account the lower interest rates I would say the new normal is around 4 - 5.

That is assuming that interest rates stay where they are now forever. There are lots of factors in play that make that very unlikely.
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Old Today, 06:21 AM
 
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Quote:
Originally Posted by Oklazona Bound View Post
I did not say NYC would go back to that. Nor places like California. But there are factors in play today like there were factors in play back before 2008 that pushed prices much higher than they should have been. Last time it was the subprime lending and other issues surrounding it now its keeping interest rates too low for too long. The country is in better shape with slow but steady appreciation not manic housing bubbles.
Just look at the list of cities I posted in the link You have lots of cities that likely will not conform. NEw York was actually towards the bottom of the list.

Home values are determined like stocks are ...fear , greed ,perception and the desire to live in that house in that area determine price ...to think other wise Is like saying all stocks should trade for no more then the historical average p/e of the markets ..

It is an incorrect assumption

Last edited by mathjak107; Today at 06:46 AM..
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Old Today, 06:42 AM
 
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I'd just like to correct the OP. 2012 was the housing bottom and when prices normalized. In my brain I was conflating the stock market bottom with the housing bottom, although the latter was delayed because housing is less liquid.
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Old Today, 06:51 AM
 
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Originally Posted by JonathanLB View Post
Yeah sorry but lol @ a house being 3x your income average. That would be like $100-150K houses in tons of markets and that ainít happening. Especially not when first time home buyers only need to put down 3% and thereís a ton of generational wealth.

Some people need to climb out of their bubble because itís killing their understanding of the local housing market. The Vegas forum has this issue, people whining that the average wage earner canít afford a house therefore itís overpriced. Maybe if it was somewhere in the Midwest, ok, but take a world class city with world class dining and entertainment and great weather, next to a state with horribly overpriced real estate, and it doesnít matter at all what the average wage is there, has nothing to do with housing prices especially at the high end. Two of my relatives have retirement money from a more expensive state, a pension from there too, another friend bought a million dollar house and works remotely / online business, I also donít care or rely on the local economy, and plenty of retirees think houses are cheap just like I do because they are cheap by any West Coast standard.

I feel sorry for the locals who find the houses expensive but thereís a bigger world out there with a lot more money than they realize and the simple reality is how cheap or expensive a house is doesnít depend on the local economy but the global economy. As long as people come from places where the market is far more expensive, than the area will be seen as cheap to enough people to lift housing prices. Itís irrelevant that $500K is a lot to an employee on the Strip. Itís entirely relevant that $500K is a bargain for anyone coming from CA right next door. Maybe it matters to young people that the local economy canít support that house, but it sure doesnít matter to middle aged and older people who are selling a much more expensive house and may be able to pay cash for a house in a cheaper area and may have enough passive income sources elsewhere to shrug off the local economy.
You're describing an arbitrage that will eventually disappear and a small number of home buyers who can either pay cash or service a mortgage with passive income. Also most inherited wealth is locked up in primary residences. That isn't a wealth transfer from another asset into real estate; it's a same-kind transaction that wouldn't inflate the housing market. I think your perspective may be colored by your own background.

It's much more likely house prices have been bid up by more access to financing than they have been bid up by an increase in real wealth. And as we saw in 2007 if that financing source dries up house prices revert to the historical trendline.
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Old Today, 06:53 AM
 
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The wrong assumption is that it is only locals that live and work in a given area so prices are based on their incomes ...but you take any number of desirable places and it is not just about the locals it’s about what transplants or outsiders can afford ...

When you have millions of retirees potentially leaving high cost of living areas for the more desirable cheaper areas it is that money that influences prices too .

Don’t forget a retiree with what is now a 600 or 700k paid off house who saw 3% appreciation has a whole lot more than a local in cheapsville who saw the same 3% inflation and has a 200k house they can sell and move somewhere cheaper .

Plus the higher wages in these high cost areas likely are giving them a higher social security check then locals .


So naturally if they want to live in a desirable area they will be willing to pay more than locals and prices will reflect that fact..

Holy cow ,you have to see what homes are going for in the villages in Florida because of demand ...hundreds of thousands of dollars ...you have to make a reservation on a bus to go look at the models and then make an appointment to buy these homes are selling to transplants so fast ...we went to check it out and demand was insane there.

These homes are selling for way more then any median or average incomes based on what locals earn could ever reflect because of demand

Trying to come out with some universal value is just crazy and it will never work out that way just like every stock will never trade at some average p/e ratio
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