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You are quite right in your observation. Houses are overvalued and that's why prices are going down. Most of NJ is in a bubble. Although there has been a 25% correction so far, we are still in bubble territory. We need at least a further 25% for prices to come inline with income. However given the state of the economy, high taxes and the bleak employment situation don't be surprised for the worse. Things in real estate move slow and it could take a few years.
how do you know that any homeowner purchased a home 5-6 times their income? you're assuming that the median household income of a town is correlated to the median home price. that would only be true if every household owned.
I don't know that howeowners purchased 5-6 times their income but the numbers from 2009 SEEM to suggest that TO ME.
So if it's not homeowners then it's renters making up the median household income( at least enough to throw off the numbers) ? So that means the homeowner lives in another town and rents his home to people making less then what it would take to own that home, thus making the numbers more likely to be accurate?
SO then that means from 2000 vs 2009 in hawthorne and most of these towns (even towns with very little renters) the renters have increased enough to throw off the numbers?
OP, you're right, it's crazy. And as we found out a couple of years ago, people really couldn't afford homes 5-6x their median household income.
This has always been an expensive area in which to live, and people are going to be willing to pay a premium to live in an area with all of the amenities that the NJ/NYC area has to offer. The days of people gettings houses for 2x their HHI in this area are gone, probably forever. But I don't see how the house prices can stay at 6x HHI for the long-term.
Prices have come down, but they're still ridiculous. I'm hoping for at least another 30% reduction in the better towns. I think one thing that's inflating the ratio of HHI to house value in this area is a lot of senior citizens on fixed incomes who bought a house in a desirable town 40 or so years ago at $35,000 or so (way less than 6x HHI at the time, more like 2x-3x) and now want to sell that minimally updated house for $800,000 while refusing to budge on price.
It would be great if we could get a realtor or someone else in the industry to address the question. Maybe they have knowledge that people outside the industry are not aware of.
So are you saying the people with ALMOST glen rock salaries moved to hawthorne to afford the housing there. If so how does that effect my example. Wouldn't that just increase the MHI (median household income)in Hawthorne and thus increase the MHP (media home price)?
I agree on the salary of the person moving in is all that matters however what else would it be about other then the people living in the house, in the town. The numbers I pasted are of "present" owners. The numbers cant be of future purchasers not entered into the system yet. You lost me here.
BTW there are a lot of examples so far as to how my logic could be off in some instances etc but look at the numbers from 2000. Theres a reason they are different from 2009.
As Brady said, renters are one thing that will bring down HHI without having an impact on home value, and Hawthorne does have many multi-family and rental buildings in the downtown area.
Regarding the numbers you'd have to have more information to make any relevant conclusion. For instance, you'd have to look at the Avg. HHI for anyone who bought house in the area in the last decade( I expect you would find that it is much higher than the median, especially since 2008). You'd have to see how many people moved into the area vs. how many people have lived there for an extended period of time(how do you know they didn't move into the area when values were at lower levels?). You'd also have to look at the age demographic for existing versus new homeowners( are there a lot of retirees living in the community with high net worth but low incomes?). All of these factors will have an effect on Median income without any effect on home values.
Overall using Median HHI to predict home price increase or decrease is flawed with many holes. Only some of which are stated above.
Excellent topic OP. Alpine, NJ is an extreme example of the disconnect between median HHI and median home values. In 2010, Median Household Income there was $166,000 with a median home value of $3.4 Million.
I mentioned this in another thread recently, and someone tried to explain by stating that accumulated wealth is what enables someone in Alpine to pay the mortgage so to speak. I don't buy that explanation at all.
Quote:
Originally Posted by tdstyles
Regarding the numbers you'd have to have more information to make any relevant conclusion. For instance, you'd have to look at the Avg. HHI for anyone who bought house in the area in the last decade( I expect you would find that it is much higher than the median, especially since 2008). You'd have to see how many people moved into the area vs. how many people have lived there for an extended period of time(how do you know they didn't move into the area when values were at lower levels?).
Excellent topic OP. Alpine, NJ is an extreme example of the disconnect between median HHI and median home values. In 2010, Median Household Income there was $166,000 with a median home value of $3.4 Million.
I mentioned this in another thread recently, and someone tried to explain by stating that accumulated wealth is what enables someone in Alpine to pay the mortgage so to speak. I don't buy that explanation at all.
Hal in some places I can see a large savings through inheritance or huge gains or simply savings, throwing off the numbers. You can make 166,000 but if you have 2 million in the bank and put down a huge downpayment then the numbers would be off. But how many of those situations need to occur to throw the numbers. I would think a lot. Maybe in the upscale towns thats more likely to happen but I still cant see it happening enough to throw the numbers off for the median.
I'm NOT trying to prove myself right here, I just wanted to have a discussion and figured if enough people post their opinions maybe I can get some answers.
In the end it really doesn't matter as it's all specualtion and will not make housing more affordable. I just wanted to bring the discussion here and see if I could get some insight and thus form an opinion on my own about home ownershp and pricing etc
I don't know that howeowners purchased 5-6 times their income but the numbers from 2009 SEEM to suggest that TO ME.
So if it's not homeowners then it's renters making up the median household income( at least enough to throw off the numbers) ? So that means the homeowner lives in another town and rents his home to people making less then what it would take to own that home, thus making the numbers more likely to be accurate?
SO then that means from 2000 vs 2009 in hawthorne and most of these towns (even towns with very little renters) the renters have increased enough to throw off the numbers?
renters are typically going to be your lower-than-median-income population.
OP, you're right, it's crazy. And as we found out a couple of years ago, people really couldn't afford homes 5-6x their median household income.
This has always been an expensive area in which to live, and people are going to be willing to pay a premium to live in an area with all of the amenities that the NJ/NYC area has to offer. The days of people gettings houses for 2x their HHI in this area are gone, probably forever. But I don't see how the house prices can stay at 6x HHI for the long-term.
Prices have come down, but they're still ridiculous. I'm hoping for at least another 30% reduction in the better towns. I think one thing that's inflating the ratio of HHI to house value in this area is a lot of senior citizens on fixed incomes who bought a house in a desirable town 40 or so years ago at $35,000 or so (way less than 6x HHI at the time, more like 2x-3x) and now want to sell that minimally updated house for $800,000 while refusing to budge on price.
Something's got to give.
honestly, do you know anyone who bought at 5x or 6x their income? i don't even know anyone who's bought at 4x their income.
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