How're we doing on Home Prices (July 2013)?

By -

The first two measures compare prices to rents and to median income. Doing so, factors out the "nominal" aspect of price-change.

Price-to-Rent ratio: Over a year ago this measure was almost down to the 1990 average. Since then, it has almost flattened out, falling only slightly.

Source: As always the best source for such charts is the Calculated Risk blog.



House Prices to Median Household Income

 Price-to-Income ratio: A very similar pattern here. (Caveat: Chart only up to 2011)


By both these measures, we can see that prices are slightly above their historical average, but only slightly (and way below their boom-time prices). They also seem to be flattening out.

Seems a decent enough time to buy a home.



Debt Obligation Ratio: Instead of price, this measure looks at the monthly payments. Since interest rates are low (they've risen in the last month though), by this measure people are spending a historically low percentage of their incomes on mortgages. Other consumer debt is not high either, by historical comparison.

Again, a decent time to buy. In fact, if one considers interest rates to have bottomed, it's a good time to buy.


Home ownership rate: This is the one measure of these four that is not so great. Though it is off its peak, it is not down to historical levels.

In other words, there is no huge "pent up demand" for homes.




Summary: Home prices could drop a bit it more while bottoming out. However, it seems a reasonable time to buy, base on "U.S. averages", if one plans to keep the house for many years. Buffett and Schiller have been saying so for about a year, and they're pretty savvy on this topic. The numbers above support them.

Caveat and Disclaimer: It's said that "all real estate is local". All the graphs above are national averages; local situations can vary quite widely. 

Comments

Post a Comment

Popular posts from this blog

Country Shares of World GDP

By -
Image
Here's a chart of world GDP, broken down by country share. ( HT: Carpe Diem ). Careful with the x-axis, it is not at all to scale! The basic idea is that India and China had large shares pre-industrial revolution, after which Europe rose. The U.S. shoots up, to over 40% of world GDP by 1950. Then, Japan begins to grow in the 1960s, and China in the 1980s. Suppose countries end up with GDPs proportionate to their populations. What would that picture look like? I've added a bar to the right, showing the break-down of world-population. Look at the U.S. squished down, with less that 400 million out of a world population of over 7,000 million. The biggest change is in the previously un-noticed 'rest of the world". If Africa, the Middle East and so on moved toward freedom, that could be the story of the century.  What if they do not? Here's a chart with a new assumption. Suppose the "rest-of-world" does not increase its relative s...
Read more

TARP

By -
The Daily Show Get More: Daily Show Full Episodes , Political Humor & Satire Blog , The Daily Show on Facebook ( Link, in case the video above does not play ) In the video above, the Daily Show slams the Fed for giving banks $7.7 trillion in secret. This is a gross misrepresentation that started with a shoddy Bloomberg story and was later echoed elsewhere in the Blogosphere. Simply put, the Fed did not lend anywhere near $7.7 trillion . It was closer to $2 Trillion. Secondly, this total was widely publicized at the time. (What was kept secret was the details about which banks got funds and how much. Everyone knew the details were not being disclosed, and some politicians were quite vocal asking for the details.) The Fed responded to Bloomberg's article, and Bloomberg says they "stand by their reporting", but the details of their clarification show that they were at least guilty of writing in a way that readers might easily be misled. As much as I woul...
Read more

How're we doing on Unemployment? (Feb 2012 Edition)

By -
Image
In October I posted some GDP graphs from the excellent Calculated Risk blog. In summary,  "Real Personal Income"  was still 5% below the pre-recession peak when ignoring "transfer payments".  Additionaly, in four years of recession, the population has grown, and the numbers look worse on a per-capita basis. In this post, I switch my focus to unemployment. Unemployment rate has bottomed:   Here is a graph ( sharper original on Calculated Risk ), comparing the rise of unemployment (downward in the graph) in past recessions, and how soon the rate recovered to its pre-recession level. Post WW-II,  the unemployment rate has never turned so weak nor has it remained weak for so long. Based on historical patterns, it is optimistic to think unemployment will return to its recent pre-recession low (about 5%) any time in the next 2 years. Participation rate falling: One problem with the unemployment rate is that it under-counts dejected workers who have gi...
Read more