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Mikeykid, you're missing a few key points.
A. LI & the NY Metro area have higher median incomes.
B. Land is very limited, we're on an island, Nassau County is 99% built out - it sounds cliche but were not making more land anytime soon.
C. Demand is high and Homeownership rates are the lowest in the country here -- and not because of affordability, but because of A and B above...while at the same time vacancy rates are ultra low relative to the US.
City Homeownership Rate(%)
1 Los Angeles-Long Beach-Santa Ana, 51.1
2 New York-Northern New Jersey--Long Island 51.6
3 Houston-Baytown-Sugar Land 59.5
4 Dallas-Ft. Worth-Arlington 61.4
5 Miami-Fort Lauderdale-Miami Beach 64.5
6 Boston-Cambridge-Quincy 66.4
7 Washington-Arlington-Alexandria 67.1
8 Chicago-Naperville-Joliet 67.7
9 Atlanta-Sandy Springs-Marietta, 68.4
10 Philadelphia-Camden-Wilmington 70.5
Mike, your chart is not helping your case at all.
Housing jumped up quickly and see that blue line towards the right side of the page? It's pretty horiziontal, yes?
This indiciate prices have stabilized.
So the blue line prior to the spike was pretty horiziontal and now after the spike it is leveling again.
THIS IS WHAT I'VE BEEN SAYING!!!!!! THANKS FOR PROVING MY POINT!!
Unless you believe the blue line should be lower? Is that it? Housing just shouldn't cost what it does, huh? They are "Priced right" in N Carolina, just not here? If that's the case, would you mind posting a similar chart for the price of milk? How about cars? Electricity? Gasoline? Gee, do you think any of these things are the same price today that they were 10 years ago?
Oh, and since you love these charts, If you look really close you will see the median income has gone up what looks to be around $10,000 since 2003.
Hard to tell as the $100,000 spread between rows is about an eighth inch.
Fundamentals. Lenders have returned to historically normal lending practices (no more than 3x annual salary or a monthly debt-to-income ration of 28% to 36%). So, if the median home price on LI is ~$400K and the median household income is ~100K, where is the extra money coming from to afford houses at this price? What is holding up that blue line? Imaginary equity from the bubble. It will take some more time for the imaginary equity from the bubble to work its way from the system. As time goes on, sellers are realizing that buyers aren’t being approved for what they want to sell their house for, foreclosures and shadow inventory hit the market, prices will decline so more.
Looking at that chart, it is unreasonable to think that prices inflated during the bubble have to stay there without anything to hold them up - just because. That’s the same attitude as real estate prices never go down, yet here we are.
Fundamentals. Lenders have returned to historically normal lending practices (no more than 3x annual salary or a monthly debt-to-income ration of 28% to 36%). So, if the median home price on LI is ~$400K and the median household income is ~100K, where is the extra money coming from to afford houses at this price? What is holding up that blue line? Imaginary equity from the bubble. It will take some more time for the imaginary equity from the bubble to work its way from the system. As time goes on, sellers are realizing that buyers aren’t being approved for what they want to sell their house for, foreclosures and shadow inventory hit the market, prices will decline so more.
Looking at that chart, it is unreasonable to think that prices inflated during the bubble have to stay there without anything to hold them up - just because. That’s the same attitude as real estate prices never go down, yet here we are.
Nice post, thank you.
Three quick points:
1-There is no reason to think the blue line will not remain level for 10-15 years. Past performance shows this.
2-The median home price on LI is not 400K.
3-Interest rates are very low. This helped fuel prices during the boom and it's helping things stabilize.
Imaginary equity becomes real when homes start to sell at those prices. The bubble was not enough to support the prices, so it deflated.
My point remains, it is a good time to buy a house assuming you are in the market.
Fundamentals. Lenders have returned to historically normal lending practices (no more than 3x annual salary or a monthly debt-to-income ration of 28% to 36%). So, if the median home price on LI is ~$400K and the median household income is ~100K, where is the extra money coming from to afford houses at this price? What is holding up that blue line? Imaginary equity from the bubble. It will take some more time for the imaginary equity from the bubble to work its way from the system. As time goes on, sellers are realizing that buyers aren’t being approved for what they want to sell their house for, foreclosures and shadow inventory hit the market, prices will decline so more.
Looking at that chart, it is unreasonable to think that prices inflated during the bubble have to stay there without anything to hold them up - just because. That’s the same attitude as real estate prices never go down, yet here we are.
On LI? Banks propping up the market by not selling foreclosures.
I was beginning to think no one remembered these two things. I think the 2.5 to 3x range is key to the affordability discussion because it correlates to the 28% to 36 % debt-to-income ratio lenders have gone back to using to calculating how much they’ll lend to an individual. Which bring us around to Median income vs. home costs – (from the LI Index 2011 - Long Island Index: Housing Affordability )
“The burden of high housing costs - More than a third of all Long Islanders are burdened with high housing costs – that is, they spend more than 35% of their income on their housing. One in five residents, in fact, spends more than half of their income on housing.”
As seen in other housing down turns, the NY metro area is usually late to the party. With the pressure from lenders on the amounts they will lend, the shadow inventory that will one day drip or flood into the market, baby boomers starting to retire and sell, changing demographics of what younger generations want, I’d say there are obstacles of LI home prices in the next few years. I would expect to see prices remain flat at best, but I wouldn’t be surprised by a drop of 15%.
Lets just say 1.5 million people live on LI for arguments sake...and there are only 500k homes on LI. Could it be that the people buying the 500k homes are in that category that make 100k? And the remaining folks are the ones making up the 40k average salary on LI? Therefor giving a false representation of buying power and average income?
Seems legit to me. No?
Quote:
Originally Posted by Redd Jedd
Fundamentals. Lenders have returned to historically normal lending practices (no more than 3x annual salary or a monthly debt-to-income ration of 28% to 36%). So, if the median home price on LI is ~$400K and the median household income is ~100K, where is the extra money coming from to afford houses at this price? What is holding up that blue line? Imaginary equity from the bubble. It will take some more time for the imaginary equity from the bubble to work its way from the system. As time goes on, sellers are realizing that buyers aren’t being approved for what they want to sell their house for, foreclosures and shadow inventory hit the market, prices will decline so more.
Looking at that chart, it is unreasonable to think that prices inflated during the bubble have to stay there without anything to hold them up - just because. That’s the same attitude as real estate prices never go down, yet here we are.
Nice post, thank you.
Three quick points:
1-There is no reason to think the blue line will not remain level for 10-15 years. Past performance shows this.
2-The median home price on LI is not 400K.
3-Interest rates are very low. This helped fuel prices during the boom and it's helping things stabilize.
Imaginary equity becomes real when homes start to sell at those prices. The bubble was not enough to support the prices, so it deflated.
My point remains, it is a good time to buy a house assuming you are in the market.
1 – Past performance in not an indication of immediate future returns. Past performance shows there are periods of losses and gains and flat areas in between. If anything, the Schiller chart below shows that overall, prices return to the norm after a big run up or drop off.
2- The median is roughly $400K (~), or $375K in the data Mikey posted.
3-Interest rates don’t matter if you can’t get a loan, or if you have to get one based on your income and not what the seller wants for his property, which is my point.
As time goes on, people who bought at inflated prices (say from the years 2003 to 2008) who need/want to sell at those same prices can’t because buyers can’t get loans large enough to cover the costs. So sellers will need to lower their prices. The “equity” that someone thinks they have from their 2003 to 2008 purchase goes away and they aren’t able to bring it to their next deal/trade up.
The further away we get from 2008, the smaller ones “imaginary equity” becomes, as homes cannot continue to sell at those inflated prices. Prices come down since buyers either can’t get a loan large enough or sell their current home at a level high enough to keep the inflated prices up.
Interest rates have now been historically low for a few years and home prices are still dropping. Low interest rates didn’t have as much as an effect as banks and lenders wanting to make as many loans as possible during the boom because they were either selling the loans as fast as they made them to groups buying them to use in mortgage based securities or using them for their own MBS.
It is a good time to buy a house if you need one and have a long range time frame. If you expect to make money from it within the next few years, it probably isn’t a good time to buy in most markets.
Mike, your chart is not helping your case at all.
Housing jumped up quickly and see that blue line towards the right side of the page? It's pretty horiziontal, yes?
This indiciate prices have stabilized.
So the blue line prior to the spike was pretty horiziontal and now after the spike it is leveling again.
THIS IS WHAT I'VE BEEN SAYING!!!!!! THANKS FOR PROVING MY POINT!!
Unless you believe the blue line should be lower? Is that it? Housing just shouldn't cost what it does, huh? They are "Priced right" in N Carolina, just not here? If that's the case, would you mind posting a similar chart for the price of milk? How about cars? Electricity? Gasoline? Gee, do you think any of these things are the same price today that they were 10 years ago?
Oh, and since you love these charts, If you look really close you will see the median income has gone up what looks to be around $10,000 since 2003.
Hard to tell as the $100,000 spread between rows is about an eighth inch.
Just for the record, I'm trying to present the data without sinking much time into it... I'm just pulling down their hosted Excel spreadsheets and using a chart wizard. It literally takes 90 seconds. You can subscribe to their service for much more detailed reporting - if you cared. Even if you took 90 seconds yourself and looked to compare to other areas I would respect that - but you obviously didn't. So I find it rather disingenuous to argue the data with rhetoric and anecdotal tidbits - and the best part instructing me to do more work for you. I provided links - you have google - but I guess you'd rather just throw out made up numbers instead of actually doing a tiny bit of research. Remember I started this because of your "show me the data", "the data doesn't exist"...
Well there is data - and it clearly shows that LI used to be very competitive nationally on this affordability index. In fact, it was probably THE place to buy in the 1990s. But, as you can see - during the boom LI became one of the most expensive places to buy a house (compared to median income), even forgetting CoL (property taxes, et al). It's remained there despite everyone's assumption that "houses have come down". Well, you need to ask anyone who's entered the RE market on LI OR PULLED OUT EQUITY since 2003 if prices have come down. What do you think they'll say? "IT'S A BLOODBATH!" - "I'VE BEEN ROBBED". Of course... But when you look at the actual affordability - the numbers are not there. How many of those do you think are strategically defaulting as we type this? It could be your neighbors - NY is like 300, 400, 500+ days to foreclose... You wouldn't even know.
Quote:
Originally Posted by Pequaman
Mikeykid, you're missing a few key points.
A. LI & the NY Metro area have higher median incomes.
B. Land is very limited, we're on an island, Nassau County is 99% built out - it sounds cliche but were not making more land anytime soon.
C. Demand is high and Homeownership rates are the lowest in the country here -- and not because of affordability, but because of A and B above...while at the same time vacancy rates are ultra low relative to the US.
City Homeownership Rate(%)
1 Los Angeles-Long Beach-Santa Ana, 51.1
2 New York-Northern New Jersey--Long Island 51.6
3 Houston-Baytown-Sugar Land 59.5
4 Dallas-Ft. Worth-Arlington 61.4
5 Miami-Fort Lauderdale-Miami Beach 64.5
6 Boston-Cambridge-Quincy 66.4
7 Washington-Arlington-Alexandria 67.1
8 Chicago-Naperville-Joliet 67.7
9 Atlanta-Sandy Springs-Marietta, 68.4
10 Philadelphia-Camden-Wilmington 70.5
NYC is 33%.
Like I said, I just took the data they hosted and used chart wizard... I provided links - there's explanations, FAQs, et al on that site on how they form this index. It's not some black box. Meanwhile, what'd you do here - copy/paste from some random Bloomberg article? Not a link - not clue where this "data" came from. No point of reference.
Again, I started this because scotzilla said data didn't exist showing that LI houses are still overpriced. Well, I posted some data and references. Arguing that away with words is pretty silly.
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If that's the case, would you mind posting a similar chart for the price of milk? How about cars? Electricity? Gasoline? Gee, do you think any of these things are the same price today that they were 10 years ago?
