Curbed L.A. on Trulia’s bubble analysis (San Diego is +3% overvalued)
http://la.curbed.com/archives/2013/11/the_us_isnt_in_a_housing_bubble_but_southern_california_is.php
Hey, great news: US housing prices are NOT in a bubble.
Oh, except here in Southern California, where they are.
Trulia’s Bubble Watch report, out today, relies on a lot of crazy-sounding concepts like “fundamental value” and “undervalued,” but then housing prices and bubbles and money are all just inventions based on shared delusions anyway and what are we talking about again?
Disorienting terminology aside, the report at least makes some comparisons that can tell us something–it looks at “the price-to-income ratio, the price-to-rent ratio, and prices relative to their long-term trends, using multiple data sources.”
So if houses are going for a lot more than what those numbers might predict, Trulia declares a bubble; a lot less, no bubble.
Nationwide, housing prices are four percent under what Trulia thinks they should be, so there’s no bubble (compare to 39 percent above at the beginning of 2006 and 13 percent below at the end of last year). But in Los Angeles County, prices are 12 percent above where Trulia thinks they should be. BUBBLE. Of the 100 largest metro areas, LA is second most bubbly only to Orange County, which is 13 percent above.
It’s only overvalued if the owner must sell it or cannot make the payments.
Or a builder will build a nicer newer one cheaper.
I guess it all comes down to inventory in Socal IMO.
They don’t seem to be over building at the moment.
Agreed, and a wild card we’ve never seen in SoCal – little or no new building.
It has to be a contributing factor to why the turn-key homes are selling way over comps. Buyers who can’t fix stuff have very few options.
The R-team loaded up on more cheese:
http://www.inman.com/2013/11/14/slideshow-this-time-it-was-different-redfins-50-million-financing-all-about-customer-value/
Here is a good summary of the pieces in place to revolutionize the industry:
http://www.inman.com/2013/11/13/time-for-an-industry-moon-shot/
They mention price to income and price to rent ratio. Did they consider mortgage payment to income or mortgage payment to rent ratio? These numbers should look alot better due to current historically low interest rates. My experience is that for a lot of people , the monthly payment is a big factor and not simply the price of the home.
I backtracked the articles and they didn’t get that specific on their methodology, but IMHO it has to be payment vs. income.