HOME PRICES ARE STILL TOO HIGH
24 August 2010 by Cullen Roche
4 Comments
Barry Ritholtz at The Big Picture had this excellent chart earlier this afternoon that clearly gives a 30,000 foot view of the housing market. I’ve shown a similar chart in comparison to annual inflation, but this also provides some perspective in terms of median household income and CPI for rent. As you can clearly see, house prices are STILL more expensive that any other time in recent history:
Source: The Big Picture
What do the distributions for home price and household income look like for any given year?(AKA why use median?) I’m assuming this is inflation adjusted and you’re not just hoping it will come out in the division. Also, why new homes and not all home prices? New home prices are likely to capture a lot of other factors than just overall home values.
It is obvious that the true cost of a home isn’t the price. Most of the cost is the interest and tax which typical accounts for over 60% of monthly mortgage payment. This type simple minded median price vs income graph that everyone loves throw around ignores 1/2 of the cost of home ownership. What is the interest at today?
And how does uncle phil propose to do that? I belonged to PSW for a while, and he’s a strong advocate of people walking away from their mortgages, because he believes the poor befuddled masses were duped into buying more than they can afford by the big mad mortgage brokers, banks, “speculators” etc. As far as I can see, he’s still blowing that horn, so how does that slow the rate of foreclosures?
The Phil guy from PSW is a complete bluff. Don’t listen to him ever.