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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.
exactly. this is the difference between performing a scientific study, and looking at some semi-correlated statistics to come to a conclusion.
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.
So part of what your saying is the average HHI for anyone who BOUGHT A HOUSE is higher then the HHI as reported by my stats about hawthorne. So the stats are just calculating the HHI for all people not just howeowners? Thus the stats cant be used for median HHI vs media home prices because the HHI part of the equation is LOW because renters are lowering it?
"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?)."
I cant address this without asking this: What does "Estimated median house or condo value in 2009: $411,770" mean? Is it an estimate based off of sold homes in the area for 2009 or something else?
So part of what your saying is the average HHI for anyone who BOUGHT A HOUSE is higher then the HHI as reported by my stats about hawthorne. So the stats are just calculating the HHI for all people not just howeowners? Thus the stats cant be used for median HHI vs media home prices because the HHI part of the equation is LOW because renters are lowering it?
Yes, that is part of it...and there are the other factors I mentioned too. Without knowing/taking into account everything, any conclusions drawn are purely speculative.
Quote:
"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?)."
I cant address this without asking this: What does "Estimated median house or condo value in 2009: $411,770" mean? Is it an estimate based off of sold homes in the area for 2009 or something else?
So part of what your saying is the average HHI for anyone who BOUGHT A HOUSE is higher then the HHI as reported by my stats about hawthorne. So the stats are just calculating the HHI for all people not just howeowners? Thus the stats cant be used for median HHI vs media home prices because the HHI part of the equation is LOW because renters are lowering it?
"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?)."
I cant address this without asking this: What does "Estimated median house or condo value in 2009: $411,770" mean? Is it an estimate based off of sold homes in the area for 2009 or something else?
my guess is they do something along the lines of an informal assessment. because not every house was sold in 2009, you can't say what the market value of every house was in 2009. you can only estimate it.
my guess is they do something along the lines of an informal assessment. because not every house was sold in 2009, you can't say what the market value of every house was in 2009. you can only estimate it.
The government probably assesses the value of the homes when they send out the property tax bills (of course, it's just an estimate), and they probably tell that to the homeowner, who fills in the form on the ACS and/or Census.
The government probably assesses the value of the homes when they send out the property tax bills (of course, it's just an estimate), and they probably tell that to the homeowner, who fills in the form on the ACS and/or Census.
assessments for property taxes are often way out of date.
The 3 - 3.5x rule is more a UK thing than US. It applies to the mortgage amount, not the total home value, so if you're putting 20% down, max home value would be 4.375 times annual income. In the US, debt to income ratio is more important, and that depends not only on the amount of the mortgage, but the term, the rate, and other debts you have.
I just want to discuss the fact that if you research the median household income vs the median home price in most north jersey towns(using n. Jersey as an example) you will see a huge gap that does not fit the 3-3.5 X gross salary lending standard that has been reported. (I realize this has probably been discussed here before)
As a random example here's Hawthorne's numbers. Do the math on the 2000 numbers vs the 2009 numbers. 2000 was on par with practical lending standards of 3X:
Estimated median household income in 2009: $67,688 (it was $55,340 in 2000)
Estimated median house or condo value in 2009: $411,770 (it was $202,000 in 2000)
If the numbers do not make sense because of the 5-6 times loose lending situation between 2002-2006, then why is it not "logically/mathematically" correct to assume the median home price should adjust(at some point) to the 3-3.5 times lending standard that is considered safe?
I have plenty of other questions and theories as to why it will or will not adjust etc etc but lets start with this question. (if my logic here is misguided let me know where I went wrong etc)
They will adjust at some point, but it takes a while. Prices won't go down that much from here, the ratio will adjust from a gradual climb in median incomes. Rates are low now, so that makes it possible for buyers to carry more debt.
To address some of your other points, first you get an inaccurate picture by using just one town. Here are some numbers with metro areas:
NAHB/Wells Fargo Housing Opportunity Index (HOI) (see complete history by metropolitan area) This document also shows how affordability has changed. One thing this document shows is that affordability is pretty decent now largely because rates are low (even though prices are generally on the high side)
Others have already pointed out this, but if you look at median home owner income compared to median price, the picture does look a bit different. My recollection is that your 6 to 1 numbers will look more like 4 to 1 or so if you do that -- still high, but it does explain the difference. If you want to pursue this, you can get data on home owner income by looking at the decennial census data for 2000 and 2010.
The other way prices can stay high is if sales are lower. Sellers have very limited capacity to absorb losses, so they can't quickly adapt to a drop in demand. The result is that they keep their prices the same, and sales pace slows.
To all this, I'd add that the lending situation is still quite loose. It's only "tight" if you compare it to the situation in 2006.
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