first rule: do not talk about Seattle Housing Bubble
Text is Northwest Multiple Listing Service's August report and Link is http://www.nwmls.com/discover/library/statistics/reportssum/summary.PDFNorthwest Multiple Listing Service's August report
, the average single family house price in King County is over $700,000 and the median price is almost $430,000.
I'm guessing then that the average household income is $233,000 or that people bring home a monthly net income of $10208. The median income should be $143,000. But the
Text is AmLife.US Economic Distribution Table and Link is http://www.amlife.us/economic_trends.htmlAmLife.US Economic Distribution Table
(scroll to view) shows 2004 incomes to be well in the five-figure set.
Yeah yeah it's gauche of me to bring this up, you're flinching as you read this, but it makes me frickin' weep -- all this time spent learning about how to evaluate stock fundamentals, what bonds are and how they work, how to live within my means, but never how to make sure my salary rises 15% every year to keep up with utilities and housing prices. I guess half of King County is pretty comfortable, financially, so they won't mind if the "impossible" happens and there's a 25-30% drop in real estate prices over the next six years. Some people are estimating steeper drops, like 50-70%.
Is anyone from these cities: Sacramento, Los Angeles, Irvine/Santa Ana/Anaheim, Miami, Phoenix, Las Vegas, Boston, San Diego, San Francisco reading this? Please share the state of your locality's housing market.
It could be my lousy math skills that confound me. Twelve - fifteen years ago I was reading personal finance primers that counsel against buying a house priced beyond 2.5 times one's household income. Mortgage interest rates then ranged from 6.65% to 7.49% (
Text is source and Link is http://mortgage-x.com/general/national_monthly_average.asp?y=1993source
). Rates so far this year are indeed lower, 6.30% to 6.77% (
Text is source and Link is http://mortgage-x.com/general/national_monthly_average.asp?y=2006source
). Maybe the personal finance primers nowadays are advising to go no further than six times one's household income owing to this INCREDIBLE DROP IN MORTGAGE INTEREST RATES.
Here's the deal: historically houses have appreciated at the rate of inflation plus 0.4%. Either we're in a big housing bubble, because house prices zoomed up from 2003 onward, like 15% year over year appreciation, which I once believed could only be done by high-flying tech stocks (but not sustainably over five years), or the silent and deadly hyperinflation era is here and no one is talking about it.
Somehow people are getting the $$ for these pricey houses. After all, price is determined by supply and demand. Many $$$ chasing few houses leads prices to escalate. But wait! Why are homebuilder stocks like Beazer, Toll Brothers, and Hovnanian trading at or below book value? They should be raking it in like ExxonMobil!
Let's see, inflation adjusted wages for the state of Washington dropped 8.1% from 2001-2005.
Seattle is sixth in the nation in Option adjustable rate mortgages, plus a recession is looming. Economists are predicting October 2006, although some, following retail industry data, say it's already here.
Yes, I'm sure that we will be spared. [b]