Wednesday, February 25, 2009

It's not Just Me

According to today's WSJ, rent/own ratios in Sacrmento are back in line with historical averages.

Lander also has a post, showing Sacramento area affordability is now up to 66%, from a low of 7%.

The economic fundamentals are lining up. Is there still downside risk, yes. However, if you buy a home as a place to live, fundamentals are a good indicator for the long term.

9 comments:

Husmanen said...

From the WSJ article...

I like Mark Zandi's comment, Chief Economist from Moody's, "The bottom is coming into view .. but we've still got a ways to go."

The homes that I am looking at in EDH and Folsom are still at least 25% out of sync. I agree with Zandi and that the trends are in the right direction.

Also, Jason Schanta's example is good. If he puts 20% down, 30yr loan at 5% I get a PITI of about 2600 per month. Which is close to his 2400 he mentions.

Those numbers are not off too much, and nothing compared to the bubble years.

Again, I think Folsom and EDH have a ways to go with the rent/buy calculation if the comparison is PITI to rent (like the example).

Buying Time said...

Obviously these nubmers do not apply to the entire Sac metro area....but the fact that the averages/medians are lining up is a good one.

Speaking of price/rent in EDH/Folsom. My LL hasn't been able to rent out our place, and he has been trying for like a month. He may have to drop the price.

If rents fall, home prices will have to fall even further to compensate.

Deflationary Jane said...

see my post on Lander's site. The data isn't equal, especially now that we're giving back wage increases from the last decade. Wage data has a lag time going up as well as going down.

Then there is the whole changing the affordability calc methodology back in 06 (I think it was 06 or was it early 07?).

Deflationary Jane said...

Jen,

Your LL should do better then most. The place is big and has a garage in a nice neighborhood. 1&2 BR units are what is getting really hammered along with units without garages. This seems to be a sentiment move in the last 3 months.

Vanda said...

I would take everything that WSJ says with a very large grain of salt. I would also suggest readin Calculated Risk for and alternate opinion.

Lander said...

Again, I think Folsom and EDH have a ways to go with the rent/buy calculation if the comparison is PITI to rent (like the example).

In a presentation a few weeks ago with Chris Thornberg, Mike Lyon (Lyon RE CEO) stated at least twice that El Dorado County home prices were going to be hit hard in the next few years.

Both men predicted no recovery in home prices until 2012.

patient renter said...

Both men predicted no recovery in home prices until 2012.

Did they mention what their definition of recovery is?

Husmanen said...

Just a thought...

recovery could mean not decreasing in price

Jacob said...

recovery could mean not decreasing in price

That's when the recovery is over.

A couple indicators I am waiting for is job losses and yoy home median losses to start to decrease.

Prices will still continue down, but once the rate of decline peaks then we should know that the bottom is coming in another 12-18 months or so.

Affordability doesn't matter if you are worried you won't have a job in a few months.

But I am geting more hopeful as theses economists have stopped predicting just another 5% to bottom, or bottom in < 6 months. Now it is getting more realistic with the bottom occuring not months from now but years.