This skewed distribution can be seen by contrasting the recent OFHEO figures with DQ median (which is showing between 20%-35% drop depending on the county). The OFHEO data only shows a 17.68% drop in prices over the last year, and are still showing a 22% increase over the last 5 years.
From the Bee's Homefront Blog, OFHEO "is the national gold standard for measuring home prices. It reflects the same homes sold over time rather than the median, which lately tends to reflect the lowest end of the market activity with foreclosure properties."
I don't know too many who's wages have increased 22% over the last 5 years (the equivalent of getting a 5% raise each year)*.....its no wonder the buyer's still can't keep up.
* Of course I work at a not-for-profit, so those in the private sector may have done better in the boom years.
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There is really no new news here, but it does give a good perspective on the info beneath the headlines about sales up median price down that we see so much. I think conditions I see in Auburn seem to parallel those type headlines.
It's like a tale of 2 markets. The first market is the under 300K market which compared to 2007 is booming. The second market is the over 400k market which is stagnant. Especially in the 800 - 600k range.
Given the lack of sales in the higher price ranges, It's easy to see why the median price for the entire market is so low. That's not to say there is no movement in the higher ranges, but from a feet on the ground perspective, the few homes moving now for about 600k started out above 800k and are seen as relative bargains (today atg least), while homes that came on the market in the 600 range are sitting. I've gone to 2 open houses in the past few weeks that fit the former category, both were head and shoulders above the competitition at that price point and were each pending sale within days of the open house.
22% over 5 years is 4% per year, and
I think there are more people that have seen their wages climb this much in 5 yrs than there were homes sold in the region. The 'people can't afford homes based on income' argument doesn't make sense any longer. People's income can support the home prices now.
Thanks for the "on the ground perspective" MCB44!
Tia - Yes, you are probably right. From what I understand state workers receive around 4% a year. So a good chunk of the local population can more or less keep up with that rate. (I had assumed a base salary, and four years of compounded adjustments.)
People's income can support the home prices now.
Then why is it that the CAR's affordability index, as fundamentally flawed as it is (based on adjustable loans at around 5 times gross income), still shows that a large portion of California's can't afford a home?
From what I understand state workers receive around 4% a year
I should throw out there that many of them have salary ceilings for their positions which they've hit up against and cannot move beyond. So once they've hit that ceiling, they're stuck until the ceiling is moved up.
"The 'people can't afford homes based on income' argument doesn't make sense any longer. People's income can support the home prices now."
Let me be brave and offer up my own situation.
Income per 2007 tax return: 95K.
Credit score: 780. Loans outstanding, in total: 18K.
Now, I think that compares pretty favorably to the average house hunter.
However, and very sadly, I have been unable to save much of a down payment (10K). I feel grateful that I was able to sell my condo in 2006 for enough to pay my agent's commission and pay off my old student debt and credit card debt.
Many of the readers here have enviable down payments, but they are in a minority when compared to prospective buyers in general.
I can qualify for about 250K on a conventional mortgage, which is OK with me and about what I feel comfortable with, anyway. So if I find something I can be happy with for 250K or less, that'll be great.
My income would qualify me for more, but without that down payment, it's a moot point.
cmyst. Thanks for sharing your situation. I have just a couple of questions for you though.
Is that income only yours, or you and a spouse? Somebody correct me if I am wrong, but will not qualify as a first time homebuyer again after two years of not owning? That would allow a 3% down payment and the $7500 first time homebuyer credit.
If you are single and that is your income, what is keeping you from saving more? Your debt seems to be insignificant in comparison to your income.
My husband and I have similar stats. We make about $112,000 combined, saved for the last 4 years and accumulated close to $100,000, partially thanks to some good investments in oil and the euro. It took a lot of work, but we did it. Now we have a nice little home and a payment less than our rent was. Interst only 5 year arm. We are not worried about resets, the caps are low and we still have a good amount of cash in the bank and we continue to get nice raises. I have built in 5% raises with a 5-9% discretionary portion as well. Several of our friends are in the same situation as well and on the hunt for their first house as well. Point being, there are buyers lurking in the shadows.
Our down payment is 90k. 80k came from selling our home in the D.C. area. Only 10k came from saving up (which is pretty tough to do with two kids in daycare).
So our sizable downpayment is due to he fact that we were moving up at just the right time (arrival of 2nd kid in 2006). First-time buyers don't have that advantage. And these days, move-up buyers don't either, unless they have been in their home for a little while.
5% annual raises....I'm starting to think I am underpaid!
Nope that's the total household income. It supports three people and gas for three cars.
Obviously, I wish I'd bought in 1995 and sold in 2005. But things could be worse, and at least I broke a bit ahead of even.
Thanks, BT -- my "kids" aren't toddlers, but there are living expenses to having a family.
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